In his speech King warned people entering the housing market to carefully consider the possibility of further rate rises and of a drop in prices. He said that house price inflation was “now at levels well above what most people would regard as sustainable in the long term.”
Ray Boulger, senior technical manager at Charcol, said: “When the governor of the BoE says something like this, people sit up and take notice. The last thing he wants to do is raise interest rates to a level where it is harming manufacturing, simply to try and control house prices. By saying this he is attempting to achieve something without having to do anything.”
Richard Sexton, national business development manager for chartered surveyors e.surv, echoed this view. “This is clearly a case of the BoE warning borrowers to slow down and avoid a big rise in interest rates,” he said.
Sexton went on to point out that most brokers would be aware house prices were extremely regional and talking about national house price inflation was often unhelpful.
“From a broker’s perspective a rise in rates may not be a bad thing because it will lead to more work as clients remortgage to fixed rates,” he added.
King did acknowledge in his speech that there had been some signs of cooling in the housing market. A survey from the Royal Institute of Chartered Surveyors (RICS) revealed that an expectation of higher interest rates was dampening consumer confidence
