Forum Brief: House prices

In its quarterly bulletin published today, the Bank of England rejects using interest rates to control house prices.

"Asset prices are unlikely to be suitable as intermediate targets for a policy whose main aim is to control inflation," says an article in the report written by a Bank economist.

Forum Response: National Association of Estate Agents

Hugh Dunsmore-Hardy, chief executive of the NAEA, told ePolitix.com: "We agree with the view of the Bank. The alteration of interest rates will have minimal effect on demand in the housing market."

Forum Response: Council of Mortgage Lenders

Michael Coogan, director general of the Council of Mortgage Lenders, told ePolitix.com: "The growth of house prices has been much stronger and lasted longer than we expected. But it clearly cannot continue at the current rate indefinitely.

"We expect the monetary policy committee to move on interest rates sooner rather than later. An early increase in the base rate would help to rein back the growth in consumer spending. Expectations of higher interest rates would also dampen conditions in the housing market and a little pain for borrowers now will help avoid the need for a more severe remedy later on.

"Although affordability is becoming more of an issue for buyers, low interest rates have ensured that mortgage payments remain a relatively low proportion of income. Borrowers should remember that even if interest rates do rise, the outlook is for much less volatility in rates than we have seen in the past. For the vast majority, mortgages will remain affordable as prices begin to slow and the housing market moves on to a sounder footing for the future."