Early interest rise needed to cool housing market
Figures released by Halifax last week showed house prices had risen by 8.5% in the year to April and the CBI anticipates further increases of 8.2% this year and 5.1% in 2015.
The CBI said it now expects the Bank of England to increase the Base Rate in the first quarter of 2015, forecasting a 0.25% rise from the central bank. It has previously anticipated an increase in the third quarter of next year.
CBI director-general John Cridland said careful attention must be paid to the housing market by government and policy makers.
“We have to remain alert to the risks posed by unsustainable house price inflation, and the Financial Policy Committee is poised to act when necessary,” he warned.
“Housing has come back under the spotlight as annual house price inflation figures have reached double digits on some measures. While housing transactions are still running almost 30% below their last peak in 2006, but they are picking up steadily.
“Although London house prices have risen 25% above the 2008 peak, this has in part been fuelled by foreign cash buyers. Outside London, prices remain around 2% below peak figures with an even greater difference when you move outside the South East.”