How does the Bank of England attempt to control the housing market?
During the reign of New Labour, it made no attempt at all. Quite the reverse, in fact, because it used the CPI to keep inflation low, ergo, allowing the BOE to keep interest rates low, it actually helped to fuel house price inflation. Brown removed the controls that the BOE used to have to control the Banks, and handed them to the FSA. Having emasculated the BOE, there was no one to control the Banks ridiculous lending policies. Housing costs were not included within the CPI, and the BOE brief did not include moving interest rates to control house price inflation. Now, however, in a very convenient change of policy, the Government are pressuring the BOE to reduce interest rates to protect the housing market. That is code for keeping prices artificially high.
