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Threat of housing bubble pushes Britain to act

FILE - In this Tuesday, Feb. 7, 2009 file photo, estate agents' boards on display outside properties, in south London. Concerns are mounting that Britain’s housing market is overheated after London house prices rose almost 19 percent in the past 12 months. Bank of England Governor Mark Carney recently described the situation as the greatest risk to the domestic economy. The International Monetary Fund is worried. Ditto the European Union’s executive commission. The pressure is on to act now rather than risk having it all come crashing down later, dragging Britain back into recession. A committee set up in the wake of the financial crisis to handle threats to domestic financial stability is due to issue its recommendations on Thursday, June 26, 2014 and economists suggest it will take action to cool the market. (AP Photo/Matt Dunham, File)
FILE - In this Tuesday, Feb. 7, 2009 file photo, estate agents' boards on display outside properties, in south London. Concerns are mounting that Britain’s housing market is overheated after London house prices rose almost 19 percent in the past 12 months. Bank of England Governor Mark Carney recently described the situation as the greatest risk to the domestic economy. The International Monetary Fund is worried. Ditto the European Union’s executive commission. The pressure is on to act now rather than risk having it all come crashing down later, dragging Britain back into recession. A committee set up in the wake of the financial crisis to handle threats to domestic financial stability is due to issue its recommendations on Thursday, June 26, 2014 and economists suggest it will take action to cool the market. (AP Photo/Matt Dunham, File) FILE - In this Tuesday, Feb. 7, 2009 file photo, estate agents' boards on display outside properties, in south London. Concerns are mounting that Britain’s housing market is overheated after London house prices rose almost 19 percent in the past 12 months. Bank of England Governor Mark Carney recently described the situation as the greatest risk to the domestic economy. The International Monetary Fund is worried. Ditto the European Union’s executive commission. The pressure is on to act now rather than risk having it all come crashing down later, dragging Britain back into recession. A committee set up in the wake of the financial crisis to handle threats to domestic financial stability is due to issue its recommendations on Thursday, June 26, 2014 and economists suggest it will take action to cool the market. (AP Photo/Matt Dunham, File)

By Associated Press 5 min read

LONDON (AP) – Can Britain avoid bubble trouble in its economy?

Concerns are mounting that the country’s housing market is overinflated, with London house prices rising almost 19 percent in 12 months. Experts fear it is fueled by debt and the market might ‘pop’ and come crashing down, as it did in the U.S. during the financial crisis, dragging the country into recession and leaving millions of homeowners with properties that are worth less than their mortgages.

In an attempt to avoid such a scenario, the Bank of England on Thursday announced measures to tighten credit and cool off the sector. The move is of interest globally, as it will show how much a major central bank can keep a specific sector from overheating in an economy that is otherwise still recovering.

Bank of England Governor Mark Carney said that while he did not see a bubble in the property market now, the recent surge in prices warranted preventive action.

“This is the limit of our tolerance,” Carney said after a meeting of a Bank of England committee created to prevent a repeat of the recent financial crisis.