Rise in House Prices Must be Restricted to 5%

Rise in House Prices Must be Restricted to 5%A warning was given by Bank of England Governor Mark Carney regarding a scheme by the Royal Institution of Chartered Surveyors (RICS). This warning was given yesterday to the policymakers that they should be "vigilant" regarding the threats of a bubble caused by the Government's mortgage subsidy scheme.

The bank should enforce its planned 5% cap in the rise of house prices. This can be done with help of the Financial Policy Committee (FPC) of the bank. To stop further rise in the prices, the FPC can insist on lesser loan-to-value or loan-to-income ratios, cut down mortgage terms and should limit the amount of lending.

On Thursday, the Council for Mortgage Lenders made a statement that gross lending has raised by 29%. This increase was nearly to £16.7bn in July.

The Government also gave a positive response regarding the UK's proposal when they came across with MPs on the Treasury Select Committee. He clarified that according to the guidance, the bank rate of interest will remain same till unemployment decreases to 7%.

Central Bank of Britain doesn't have official powers to compel banks to take similar actions. Yet, they could give advice to resist back lending.