“Today’s announcements offer encouragement that under the new Governor’s leadership the Bank of England’s approach to monetary policy is shifting towards market guidance about the medium and longer term rather than a ‘wait and see’ approach. We have waited a long time for this week’s headlines celebrating a return to growth. But as the Governor said, this remains the slowest recovering economic output on record and a premature move to withdraw stimulus measures is in no-one’s interests.
“As well as providing a degree of clarity on future interest rates, the Bank’s position also suggests it is expecting activity in the housing market to continue its current growth trend. Low interest rates will certainly encourage further borrowing, and with lenders taking responsibility for stress-testing mortgage applications under the new Mortgage Market Review rules, the Bank’s forward guidance will provide further material evidence on which to base lending decisions.
“Despite playing down fears of a housing bubble, the construction sector is still very affected by what Mr Carney called ‘exceptionally weak’ productivity in the wider economy. House building simply has to increase if we want to avoid the housing and mortgage markets tipping over under the weight of growing interest and applications. The government would do well to follow the Governor’s lead in taking a longer-term vision when it comes to housing policy decisions.”