BoE: no action now on housing, to focus on hedge fund rate risks

Wed Sep 25, 2013 5:27am EDT
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LONDON (Reuters) - Britain's housing recovery does not require any action from regulators but will need to be watched closely, the Bank of England's Financial Policy Committee said on Wednesday.

The FPC, which has been tasked with spotting risks to the economy from the financial system, also singled out hedge funds for an examination of their vulnerability to rises in long-term interest rates.

The FPC said it made no new recommendations at its most recent meeting on September 18.

The watchdog said it was keeping a close eye on Britain's housing market which has picked up speed and raised some concerns from some external economists about the risks of a new bubble in property prices.

The FPC said the housing recovery "appeared to have gained momentum and to be broadening" but activity and loan-to-value ratios on new mortgages were below historic averages.

Debts costs were low and house prices compared with earnings were at their level of a decade ago.

"In view of that, the Committee judged that it should closely monitor developments in the housing market and banks' underwriting standards," it said in a statement after its Sept 18 meeting.

If any action was needed, it would be "proportionate to the risks and consistent with a graduated response."

House prices in Britain as a whole rose 3.3 percent in the 12 months to July but jumped nearly 10 percent in London, official data showed last week.   Continued...

The Bank of England is seen in the City of London August 7, 2013. REUTERS/Toby Melville