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Abstract
The Bank of England has always had a keen interest in the U.K. housing market and housing finance. Housing issues are relevant to all three of the Bank's core purposes: maintaining the integrity and value of the currency, maintaining the integrity of the financial system, and promoting the efficiency of U.K. financial services.
This article discusses the role of house prices as a monitor of inflationary pressure, and it is argued that they are unlikely to be a good early warning of inflation in the next business cycle, even though they were in the late 1980s. Unprecedented falls in house prices have caused problems for the financial sector, but the U.K. mortgage market has responded well. Promoting efficiency and innovation in financial services entails establishing a clear and stable regulatory regime for securitization.