10-21-13 8:44 AM EDT | Email Article

By Jason Douglas


The Bank of England is monitoring the housing market for any sign that mortgage lenders and homebuyers are taking risks they may not be able to afford, a member of the central bank's financial stability panel said Monday, amid concern among economists that government policies risk encouraging a new property bubble.

Martin Taylor, a former Barclays PLC chief executive who sits on the BOE's Financial Policy Committee, said in a speech to business leaders in Wolverhampton, England, that officials are keeping a close eye on real-estate lending in the U.K. because "housing boom and bust and financial stability make uneasy bedfellows."

Mr. Taylor said the FPC is "watching for signs of over-extension on the part of the banks and the public, especially signs that borrowers were not in a position to withstand an eventual rise in interest rates," according to a text of his speech. He added that officials are also alert to any sign that a more "speculative" market might be developing in housing.

His remarks come as data from property website Rightmove published Sunday showed the average asking price for homes it advertises for sale rose 2.8% between September and October and was 3.8% higher than a year earlier. The average price for a home in London on sale on its website in October was 544,232 pounds ($880,295), a new record, Rightmove said.

Some economists are concerned that a government program to make available mortgages for buyers without large cash downpayments combined with ultralow interest rates could risk inflating a new bubble in prices.

Officials counter that their policies should encourage more homebuilding, and say prices remain depressed in large swaths of the country, hurting consumer spending.

Mr. Taylor, in his maiden speech since joining the FPC in April, didn't suggest he saw a house-price bubble forming. He said it isn't unusual to see prices rising in an economic recovery and added it would be undesirable for the BOE to cap annual increases in house prices, as some have suggested.

The FPC has been asked by Prime Minister David Cameron's coalition government to rule each year on whether the Help-to-Buy mortgage-aid program should be halted.

Mr. Taylor said that while such responsibilities are welcome, monitoring risks already present may lessen the time the committee has to devote to making the financial system more resilient to problems in the first place.


Write to Jason Douglas at jason.douglas@wsj.com


(END) Dow Jones Newswires

October 21, 2013 08:44 ET (12:44 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.
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