Carney warns of return to recession as UK house prices continue to climb

Bank of England Governor Mark Carney has warned that the UK could see its economy plunge into recession again if the housing market is left unchecked.

Speaking to MPs on the Treasury Select Committee, Carney said that people overspending on homes would mean reduced spending elsewhere, and could “tilt the economy back into recession.”

Carney’s warning comes as statistics show that house prices rose by 10.5% in the year to May, and by more than 20% in London.

Carney said: “History shows British people pay their mortgages, there are very low default rates on mortgages. What happens if households are borrowing at high multiples is they have to economise on everything else in order to pay their mortgages.

“And if enough people are highly indebted, that has a big macroeconomic impact. It can tilt the economy back into recession, and we start from a position of vulnerability. There is the possibility that currently responsible lending standards become irresponsible to reckless.”

The average price of a house in Britain is now more than £200,000 according to the latest ONS figures, while in London it is more than twice that price, at £492,000.

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Readers' comments (1)

  • increase in house prices is being fuelled by the government, giving money to house buyers without making the consequences clear if interested rates rise.

    what is wrong in the old system of save 10% and a mortgage of 1 x your partners wage and 4.5 times your wage.

    the problem is the something for nothing world we now live in.

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