28 July 2004, 16:28  BoE Bean says house prices may have hard landing

Booming British house prices could fall sharply or equally remain just at their current level, a top Bank of England official warned on Wednesday. BoE Chief economist Charles Bean said in a speech that house prices were a key uncertainty facing the Monetary Policy Committee right now as it tried to figure out whether it should follow a gradual or more aggressive approach in raising interest rates from their current 4.5 percent. "To the extent that house prices are overvalued relative to earnings, it is also uncertain how drawn out any adjustment to a sustainable ratio will be," Bean said. "There could be a sharp correction to house prices, but equally house prices could just stagnate for a while until earnings catch up." The BoE is expected to raising interest rates by a quarter-point next week for the fifth time since November.||| BoE

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