The mortgage lenders are again reporting substantial increases in house prices. And this is not happening from a position where property had become cheap – far from it.
The current rises are happening from a base where, relative to incomes, the level of prices was already some 40 per cent above the historical average. By any sensible metric, valuations were already stretched – in London and in every single other region.
It is not the level of house prices in itself that poses a threat to the wider economy, rather it is the level of household debt. But the two are inextricably linked.
Relative to incomes, household debt has fallen from the levels seen in 2008. But it is still roughly 30 percentage points above late-1980s levels.
The risk is that, when interest rates start to rise, which some believe could happen as early as this year, a significant proportion of households will face repayment difficulties, threatening the banks and the wider economy.
Rob Wood, chief UK economist at Berenberg Bank, says No.
House prices are rising fast because interest rates are low and confidence is back.
This would be a threat if it turned into an uncontrollable bubble, accompanied by a rapid debt build-up. But that does not seem to be likely.
Household debt is barely rising. Moreover, the Bank of England has been given wide-ranging new powers to deal with the risks of a future debt boom.
It started using those powers last week. The gentle initial measures will not have much effect, but that just means more action is likely.
The Bank will probably severely curtail the government’s Help to Buy stimulus programme and restrain low-deposit mortgage lending later this year.
Tighter mortgage regulations are biting, and interest rate hikes starting later this year could also weigh on the housing market.
House price inflation won’t slow soon, but the central bank’s focus on property risks suggests the nascent boom will not morph into a dangerous bubble.