15 June 2004, 11:57  BOE's King sees risk in UK housing merket

Bank of England Governor Mervyn King warned in a newspaper interview on Tuesday that house prices could fall and cause a sharp correction in consumer spending, calling this a key risk facing the British economy. In an interview with Scotland's The Herald newspaper, King said: "There is no doubt that, looking ahead, one of the risks to the UK economy is a sharp correction in consumer spending, which might be created by a downturn in the housing market." King also said he did not feel it was a good idea to use interest rates as a surprise tactic. "I don't think it is good as such to surprise the market....," he told the newspaper. "We would therefore only be making surprise changes in a situation where we had changed our view about the economy and other people had not realised that." King said he was also concerned about levels of unsecured debt among some consumers, particularly those on lower incomes. "A certain proportion of them, not all by any means, have appeared to take on quite a lot of unsecured debt. If interest rates were to rise further, that might give them difficulties in repaying that debt," he said. But he added he did not believe the debt problem was widespread enough to have an impact on rates. "It isn't a matter for the monetary policy committee. It is a social concern."///

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