Forum Brief: Brown's comments on interest rates

Gordon Brown has signalled he will support for any move by the Bank of England to raise interest rates in order to cool the housing market.

In an interview with the FT, ahead of his annual Mansion House address to the City this evening, the chancellor said "prompt action" in the past had helped the UK to a avoid stop-go economy.

Forum Response: Council for Mortgage Lending

Michael Coogan, director general of the Council for Mortgage Lending, told ePolitix.com: "Record figures for the third month in a row suggest that lending could now be on course to top £200 billion in 2002. The strong growth in loans for house purchase reflects the strength of demand in the housing market, which is driving prices upwards.

"With rates at historically low levels, a modest rise in interest rates this summer would help ensure that the housing market is sustainable in the future without causing payment difficulties for the overwhelming majority of borrowers.

"A stable housing market helps to deliver that. There are also steps that borrowers themselves can take, like reducing their risk of exposure to an unexpected loss of income by taking out insurance to cover their mortgage payments."

Forum Response: Construction Products Association

Allan Wilen, economics director at the CPA, told ePolitix.com: "The Association's recent Construction Industry Forecasts anticipate a rise in interest rates over the second half of the year. However, in setting interest rates the Bank of England should be mindful of the impact on UK manufacturing. Whilst recent weeks have seen an easing against the Euro, UK manufacturing remains in recession and under intense pressure from overseas suppliers."As I have said before, we must not allow housing to become a brake on economic growth when the rise in house prices is being exacerbated by the inadequate provision of housing due to excessive planning restrictions and delays. Current planning restrictions are both fuelling house price inflation and denying many people the opportunity of homeownership."The Association estimates that current levels of new social housing provision need to be doubled to accommodate the growing numbers of key workers who are currently being squeezed out of the housing market. It is down to government to ensure that sufficient land is made available for housing development and, as the chancellor prepares for the next month's Comprehensive Spending Review (CSR), he must assess the need for additional social homes over the next 5 years and make sure that the CSR includes sufficient resources to deliver its promise of 'a decent home for all'. The chancellor's apparent backing for an easing of planning restrictions in areas of housing shortage, as has been reported recently, is therefore very much welcomed."