By William Schomberg and Stephen Addison
LONDON (Reuters) - Bank of England Governor Mark Carney gave his strongest warning to date about the risks of a housing bubble and said the Bank was looking at new measures to control mortgage lending amid a shortage of home building.
The British housing market has "deep, deep" structural problems, chief among them insufficient construction of new homes, Carney said in an interview with Sky News television broadcast on Sunday.
"When we look at domestic risk the biggest risk to financial stability, and therefore to the durability of the expansion, those risks centre in the housing market and that's why we are focussed on that," he said.
Helped by a recovery in the economy, record-low interest rates and government schemes to help home buyers, British house prices jumped about 10 percent in the 12 months to April, raising concerns that buyers will take on too much debt.
Carney has previously said the Bank will seek to use its new powers over credit before it resorts to raising interest rates.
He made clear on Sunday that he saw the biggest problem in the property market as the shortage of new homes, saying twice as many houses were built each year in his native Canada than in Britain which has double the population.
Construction started on more new homes in England last year than at any point since 2007. But at 123,000 units, house-building remains short of the 200,000 which many economists consider to be the minimum needed each year.
"We're not going to build a single house at the Bank of England and we can't influence that," Carney said.
Also speaking to Sky News, Prime Minister David Cameron said Carney was "absolutely right" to point to the lack of housing but said government programmes were helping to get more built.
TOUGHER CHECKS
Britain has already toughened up checks for banks on mortgage applications and the Bank may take more measures as soon as next month.
The Bank was looking at the possibility of recommending that banks do more to limit the size of mortgages based on the incomes of borrowers, a potentially controversial move by the Bank that could be felt by many would-be homeowners, Carney said.
"The level of higher loan-to-income mortgages, ones above four and a half, five times loan-to-income, potentially could store up bigger problems for the future and we need to be careful."
"We need to be calibrated, we need to be proportionate, if we were to suggest some adjustments to the amount of these types of mortgages that banks should underwrite," he said.
He also said the Bank would be concerned if there was a rapid increase in high loan-to-value mortgages. "We've seen that creeping up and it's something we're watching closely."
The Bank's Financial Policy Committee meets on June 17. Other policymakers at the Bank have sounded increasingly concerned recently about the pace of the upturn in the housing market.
Earlier this month, the Organisation for Economic Cooperation and Development called on Britain to consider scaling back a state mortgage guarantee scheme launched last year by the government under its Help to Buy programme.
Carney said the Bank was checking the programme, which helps people get on the property ladder with only a small down payment, did not encourage risky lending by banks more broadly.
"It's a pretty targeted programme, it's a relatively small programme at this point but it could grow a lot and it could change attitudes in other parts of the mortgage market, that's why we have to be vigilant," Carney said.
"I would emphasise though that we do talk to the Treasury, I do talk to the Chancellor, we try to be as co-ordinated as possible in ensuring that there is a sustainable development in the housing market and that's not in the short term, it's for the medium term."
Asked about other risks to Britain's economy, Carney mentioned weak demand in the euro zone and "persistent strength of the currency." He also said low levels of volatility in financial markets could pick up, pushing up borrowing costs.
(Additional reporting by William James; Editing by Bernard Orr and Rosalind Russell)
Social justice campaigner Fr Peter McVerry has warned of a "tsunami of homelessness" over the housing shortage in Ireland.
He said that in his 40 years working with homeless people in Dublin, the problem was never as pronounced as it is now.
Speaking on RTÉ's Sunday with Miriam, he said his charity – The Peter McVerry Trust – is having to turn people away for the first time due to a lack of capacity.
"In all the years I have been working with homeless people; it has never been so bad. We are, even I would say, beyond crisis at this stage.
"There are six new people becoming homeless every day and that's the official figures. It may be more than that".
Fr McVerry said with up to 35,000 home repossessions feared over the next few years, the rise in homelessness could bring down the Government.
He said many people who would not be considered "ordinary homeless people" may lose their homes through repossession leaving thousands of families looking for accommodation.
He said: "There are also 40,000 buy-to-let mortgages in arrears...there is a dam at the end of the river, and this torrent of water is coming down; and there's no way out".
"Ultimately, because of the changing nature of homelessness, these are ordinary people who will vote, and their families will vote, I think this whole issue of housing and homelessness could bring this government down", he added.
Fr McVerry said the problem was growing as the traditional exits from homelessness - social housing and the private rental market - were no longer open to people. www.pmvtrust.ie
"There is a dearth of social housing. In the cities and in Dublin in particular; the private rental sector is out of reach for homeless people because the rents are escalating; they are going through the roof".
"The demand for rented accommodation far exceeds supply, and not only can homeless people not get into rented accommodation; but people already in rented accommodation are losing it. So, the people in rented accommodation are losing their accommodation and becoming homeless", he added.
Fr McVerry called on the Government to purchase 1,500 houses and apartments in order to ease the crisis.
He said it would be far cheaper for the Government to support homeless people in accommodation rather than putting them into a hostel or shelter.
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