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OECD Adds To Fears Over Soaring House Prices



The OECD warning that the UK should consider measures to ensure balanced house price rises reflects its fear of a housing bubble.

Mortgage rates are inextricably linked to the health of the City of London

The OECD says steps should be taken to ensure balanced house price rises

Ed Conway

Economics Editor

Portrait of Ed Conway

The Organisation for Economic Co-operation and Development (OECD) isn't the first - and it won't be the last - to issue a warning about the UK housing market.

The situation in British property is rapidly becoming the biggest economic issue facing the UK, and the OECD, like the IMF and other economic think tanks before it, is concerned about the possibility of a bubble.

Not that its concern will do much to change the probable sequence of events in the coming months.

At its next meeting in June, the Bank of Englandís Financial Policy Committee is likely to impose further checks on borrowers, preventing them from taking out mortgages if they canít afford higher monthly repayments.

It may also impose new constraints on banks who lend out large sums. Then, probably early next year, the Monetary Policy Committee will raise interest rates.

The risk - and this is something the OECD raises - is that these gentle moves arenít enough to prevent a bubble emerging.

Like most economists, it thinks that while prices are high Ė particularly in relation to earnings and most other affordability measures - weíre not in bubble territory yet (London is another matter).

But the sheer force of all the policies recently brought in by the authorities (everything from Help to Buy to the new pensions liberalisation plans) is so great that it may take more than a few macro-prudential policies to bring prices under control.

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