UK property overvalued by 10-30pc

Ryan Fowler

July 28, 2014

And the IMF has now called on the Bank of England to be prepared to curb the market should prices get any further out of control.

In its report released today following its June Article IV consultation on the UK the IMF conceded that “the overall policy mix was appropriate” but “rapid adjustment might be required”.

The report said: “Accommodative monetary policy is appropriate for now, given weak inflation pressures, but policy might need to be adjusted quickly if inflation takes off.”

One such policy change the organisation pointed to as a brake for the market was an increase in interest rates.

It said: “Interest-rate increases may also need to be considered if macroprudential tools are insufficient to deal with financial-stability risks from the housing market.”

But it warned that such a move could have a negative impact on households.

It said: “[A] steady increase in high-loan-to-income mortgages implies that households are gradually becoming more vulnerable to falls in income and interest-rate shocks.”

The IMF also said the UK must tackle a lack of supply of new homes to find a lasting solution to its housing-market risks.

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