Is it time for a second nominal anchor in the UK? - Managing house price inflation with macroprudential tools (RICS)

Published summer 2013

In this note we argue that:

The Bank of England’s Financial Policy Committee should consider adopting an explicit house price inflation policy using macroprudential tools.

We suggest setting an annual growth rate threshold in a national index, which if exceeded, triggers tighter macroprudential policy.

This should help anchor private sector house price expectations, thereby curbing excessive risk taking and the build-up of financial imbalances.

This should not be considered as a stand alone policy; it entails risks, so would need to form part of a package of measures that addresses these risks.