London property boom may force early interest rate rise

By Michelle Rock

The business secretary, Vince Cable, has suggested that the London housing boom may have to be brought under control by an early interest rate increase.

The Governor of the Bank of England, Mark Carney, has previously linked an interest rate change to a drop in the rate of unemployment to 7 per cent, and while that target looks like being reached earlier than anticipated, property owners and first time buyers have taken some comfort from Carney's forward guidance policy.

Mr Cable suggested that the extent of property price increases in London meant that houses were at risk of only being affordable to foreigners and bankers, and suggested an interest rate increase was required to curb the "raging housing boom". He did however accept that such a move would have a negative impact elsewhere, in particular parts of the UK that have not yet had a full recovery. He also suggested that the Help to Buy scheme needs to be reconsidered as he believes that the circumstances for which it was envisaged have since changed.

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