The Bank's Great House-Price Bubble Dilemma
House prices continue to rise but huge regional variations could cause problems for Bank of England governor Mark Carney.
House prices continue to rise putting them out of reach of many buyers
Mortgage rates are inextricably linked to the health of the City of London
Ray Boulger of the mortgage brokerage, John Charcol and former Treasury spokesperson, Lord Oakeshott debate new lending rules announced by Lloyds Banking Group.
Portrait of Ed Conway
It's rather ironic that the one time there is widespread attention on the Office for National Statistics' (ONS) house price index, amid fears of a housing bubble, the index then goes and falls.
But the drop in annual UK house price inflation from 9.2% to 8% in March does little to diminish concerns that the market might be on the brink of a bubble.
Nor does it change the enormous regional disparities evident across the economy. In London, house prices are rising at an annual rate of 17%.
While this is down a touch from the 17.8% rate recorded the previous month, there is little doubt that there is at the very least a boom and more probably a housing bubble in the capital.
Prices have risen so far in most parts of the city that, when compared to wages, inflation or yields, they are further out of reach for most consumers than ever before.
The only metric upon which house prices look affordable in the capital is when mortgage interest payments are borne in mind Ė but even with borrowing costs at the lowest level in 320 years, these costs are on the rise.
But saying there is a bubble in London, which is fuelled in part by debt and in part by enormous demand from foreign investors, is quite distinct from claiming there is a bubble nationwide. A glance at today's ONS figures will underline this.
Outside London and the South East, prices are rising at a far less terrifying 4.7%. In some parts (Scotland and Northern Ireland) they are falling in real terms (eg adjusting for inflation).
Moreover, prices outside London fell further and in most regions (aside from the south) have not yet regained their pre-crisis peak.
This underlines Bank of England Governor Mark Carney's dilemma. His job is to set monetary policy for the country as a whole, not just specific regions.
There are some central banks (notably the South Korean one) which do set policy region by region, but don't expect that to happen in the UK anytime soon.
So does he tighten policy in an effort to try to restrain London, and risk damaging a benign recovery elsewhere? Of course, the dilemma dissolves if, as many expect, the bubble spreads out elsewhere. But today's numbers suggest that hasnít happened quite yet.