MPC member positive but cautious on housing

One of the nine members of the Bank of England's Monetary Policy Committee (MPC), the group that sets interest rates each month, has said that she does not believe the credit crunch will have an unduly negative effect on the housing market.

Kate Barker, who voted to keep rates on hold at 5.75 per cent this month, told an Institute of Chartered Accountants conference in Southampton that there was little need to revise house price predictions in light of the financial market problems, let alone worry about a crash.

However, Ms Barker did acknowledge that one "weakness" of the sector lay with buy-to-let investors, as rents were not rising as fast as prices.

"It is not clear why recent events should prove a trigger which significantly alters previous expectations of continued robust house-price growth," the MPC member told the conference.

"The evidence from business surveys and housing market indicators will be an important part of my judgement over the next few months about how far the downside risks to the outlook have increased," she added.

The Bank is now expected to keep rates on hold next week, but many believe at least one cut is forthcoming, most probably in the opening months of 2008.

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