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UK housing market 'not overheating'

Bank of England (BoE) policy maker David Miles has said the UK housing market is not overheating and a rise in interest rates will only be used as a last resort. UK housing prices have risen sharply over the previous year, prompting fears that another property bubble may be emerging. Mr Miles said he had confidence in the Bank's Financial Policy Committee as the first line of defence against such a bubble, however. An interest rate rise is a "blunt instrument" which would be considered as a last resort but "we're a long way from that", he claimed.In December, the Bank of England announced it would scrap the Funding For Lending scheme that supports mortgage lending. The Help to Buy initiative and record low interest rates continue to fuel the housing market.Mr Miles said activity in the London housing market is currently skewing the national picture. Prices are not rising at an unsustainable rate across the UK as a whole and net mortgage lending is "lower than you might expect in a well-functioning market".Yesterday (February 17th), Rightmove revealed house prices across the UK rose 3.3 per cent on the previous month, driving the national figure to an annual growth of 6.9 per cent. In London, prices rose by 11.2 per cent."In terms of a generalised overheating housing market, I don't think that's a good description of where we are," Mr Miles said. "We're in a situation where the national figures for house prices are substantially influenced by the south east [and] London."Recently, the Ernst and Young ITEM Club said the London market is beginning to show signs of "bubble-like activity".While Britain's economy is currently growing substantially, the Bank of England has made clear it is in no hurry to raise interest rates. Head of the BoE Mark Carney recently altered the institution's "forward guidance" policy which pegged interest rates to a fall in the unemployment level.Mr Miles said there is no case for a tightening of monetary policy as there may be more spare capacity in the UK economy than the BoE originally estimated. 

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