In the midst of fears that the housing market is growing too quickly and that the strong demand for property is producing a housing bubble with a resulting possible crash, George Osborne has said that the answer lies with the Bank of England.  The Chancellor said there were safeguards in place and that the Bank would react and take action should there be a need to do so.

In an interview with BBC Radio 4, Osborne put his confidence in the current state of the housing market, the ability of the Bank to react if necessary and the recovery of the economy.

He said, “Housing has always been a real challenge for Britain and a problem in the British economy because the supply of housing has not matched the demand for housing.

“Now, the answer to that is to increase the number we build to make sure that families can afford to get on the housing ladder but I have also given the Bank of England tools to intervene in the housing market to ensure economic stability.

“They should not hesitate to use the tools that I have given them if they think it will help with economic stability. That's for them to make the judgment but let's not repeat the mistakes of the past, let's make sure we have learnt those lessons.

He was directly asked if he would in fact intervene with the process to keep the economy on track and he replied, “Mark Carney (Bank of England governor) and the financial policy committee are very qualified people to make this judgment and my job as the chancellor, the job of parliament, is to give the Bank of England the tools to do the job. Let them make the assessment.”

The Bank of England’s Monetary Policy Committee voted last week to keep the standard base interest rate at 0.5% for another month.  While this was not a surprise to economists, there were many that expressed that the current state of the housing market could move the MPC to move the rate sooner rather than later and the forecast is now set for the increase to occur in the first quarter of the year.