Governor predicts end of house price boom

Posted: 25 Apr 2007 11:26:20 GMT

Bank of England governor Mervyn King has said that he expects the current boom in UK house prices to end along with a fall in inflation.

Bank of England governor Mervyn King has said that he expects the current boom in UK house prices to end along with a fall in inflation.

Mr King made the prediction in a memo to the House of Commons Treasury select committee, in which he said that the economic conditions in Britain over the next decade may not match the recent benign trend of economic growth without high inflation, the Evening Standard reports.

The governor issued his comments in the wake of last week's news that Consumer Prices Index inflation had reached 3.1 per cent, exceeding the government's target range of one per cent above or below two per cent and obliging Mr King under Treasury rules to write an open letter explaining how the monetary policy committee (MPC) plans to tackle inflation.

A further increase in interest rates in the May MPC meeting is widely expected, with many predicting there will be more to come, moves which may slow down the housing market further.

This week Lombard Street Research said house price inflation may rise as high as 15 per cent this year.

However, this follows a prediction earlier this month by the same organisation, based on research carried out for the Daily Telegraph, that a property crash may take place next year.


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