BoE warns house price crash more likely

The governor of the Bank of England has warned people they should be cautious if they were thinking of buying property for the first time.

Speaking at a CBI dinner in Glasgow, Mervyn King said that house prices were now “well above what most people would regard as sustainable in the longer term."

“After the hectic pace of price rises over the past year, it is clear that the chances of falls in house prices are greater than they were,” King said.

Giving a clear warning of further interest rate rises, the governor said “… anyone entering or moving within the housing market should consider carefully the possible future paths of both house prices and interest rates."

King was speaking just days after the Bank's Monetary Policy Committee increased interest rates by 0.25% for the second month in succession, bringing the base rate to 4.5%.

The Bank has expressed concern over house price inflation for some time now but King’s message last night is the strongest warning yet and comes after the MPC has raised interest rates four times in eight months.


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