Governor’s comments attempt to control rate of growth in the housing market.

Following his first Mansion House Speech, Bank of England Governor, Mark Carney has ignited further speculation on when the record low base interest rate will begin to rise. During his speech Mr Carney warned that “gradual and limited” increases in the interest rate would be needed as the economy continues to recover.

The UK base rate has been at a historic low of 0.5% since 2009 following the economic decline. However with the economy continuing to recover, speculation had already begun to heighten as to when the rate will begin to rise again. Mr Carney’s comments last night have now led analysts to predict that this may happen in late 2014 rather than the previously anticipated 2015.

The governor also commented on the need to cool the threat of Britain’s overheating housing market. Mr Carney stated that the market is showing “the potential to overheat” with house prices rising more rapidly each year, currently at around 10% annually. This has led those within the industry to believe that the governor’s comments are a deliberate ploy to taper the growth in the housing market, rather than a genuine hint at interest rates rising this year.

Lloyd Davies, Managing Director at Convey Law who also sits on the Board of the Society of Licensed Conveyancers and the Management Panel of the Conveyancing Association commented:

“The housing market has certainly taken off this year, with demand outstripping supply as a result of increased availability of mortgage finance and a lack of properties for sale.

“The recent changes to mortgage regulations and the tightening of the mortgage application process, will inevitably have an impact on the housing market as individuals find it more time consuming to obtain mortgage finance.

“I think that the Governor will want to talk interest rates up, without an actual change in interest rates materialising if possible. This was a favourite ploy of the last Governor – Mervin King – who was notorious for talking the economy down, even during the good times, and taking interest rates up, to slow spending down without hitting us in the pocket.

“I think that we will see an interest rate rise in Spring 2015.”

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