'Double mortgage rates' denied
WORRIED homebuyers were assured today that Britain's big lenders have not called for the Bank of England to double interest rates to cool the housing market, leaving many unable to afford crippling mortgage bills.
A report in the Sunday Telegraph claimed that The Council of Mortgage Lenders - representing banks and building societies - said that the Bank of England's policy of gradual rate rises may not be enough to cool house prices.
The council's director-general, Michael Coogan, was said to have told the newspaper that the Bank's monetary policy committee - which sets the base interest rate - may have to consider stronger action to bring the market under control.
He is claimed to have said that if the MPC wanted to bring house price inflation down to single figures over the short term, it would have to double interest rates.
Bernard Clarke, a spokesman for the CML, told This Is Money today: 'I can confirm Michael Coogan did not talk to the Telegraph. This article was based on points made in our revised housing forecast and taken completely out of context.
'We said that interest rates would have to more than double to take house price growth below double digits in the near future but we neither expected nor wanted this to happen. In fact we expect rates to be around 5.25% at most by the end of the year, with house price inflation at around 14%.'
The CML's annual housing markets forecast said: 'There are risks for interest rates. While on the one hand aggressive rate rises exacerbate the two-speed economy and increase the likelihood of consumer payment difficulties, our simulations suggest that interest rates would have to more than double to take house price growth below double digits in the very short-term (although the CML sees this as neither likely or desirable).'
The report added, however: 'There is clearly a danger that we will reach a point where more aggressive rate hikes are necessary.'
editor@thisismoney.co.uk
