There’s been lots of media coverage following the Bank Of England’s views on the housing bubble.
According to Mark Carney, the new governor at the bank of England, the current bubble in house prices is something of a problem. A surprising announcement I thought as this is probably the only man in the country who actually has the ability to do something about it. If the housing market is getting out of hand and a bubble is forming, then all Carney has to do is to put up base rates. That’s how it’s always worked. Or he could tell the banks to stiffen the criteria on house lending to make it more difficult to get a mortgage.
Of course neither of these things will happen. Carney may talk the talk but he won’t walk the walk – not for now.
Carney was given the job to make sure the government have a good chance of winning the next election, not to upset the apple cart. No matter what happens to house prices I think it highly unlikely that Carney will upset his employer before the election. On that basis I’m not expecting a rise in base rates before April next year. He may surprise us all with a quarter per cent rise just to save face but that would be as brave as he would get.
Once that election is out of the way – that will be a different matter altogether. My view is when rates do start to rise quite a few people will be surprised at the speed at which it takes place. This is what central banks do best and what governments want most. Money printing is the only way governments can finance their spending programmes.
Inflation is coming and that can already be seen in the rise in the stock market over the last 12 months. Stocks and shares always benefit more money is slopping around looking for the same number of goods.
Property owners have been warned – plan accordingly.