08/05/2014 08:08 BST | Updated 08/05/2014 09:59 BST

Bank Of England Holds Interest Rates Amid Rising Housing Market

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Mark Carney, governor of the Bank of England and chairman of the Financial Stability Board (FSB), speaks during a news conference following the board's plenary meeting at the Bank of England in London, U.K., on Monday, March 31, 2014. Carney said the FSB wants lenders and the International Swaps and Derivatives Association Inc., an industry group, to come up with proposals to write temporary pauses into derivatives contracts struck with banks that hit financial trouble. Photographer: Simon Dawso

Bank of England interest rate-setters kept the cost of borrowing steady amid a steadily rising housing market.

Policymakers left interest rates at 0.5%, which has remained at the historic low for more than five years, as the economic recovery gathers pace.

The Bank of England has indicated that they want to see more "spare capacity" in the economy taken up before they consider increasing interest rates, prompting expectations of a first rise to happen next spring.

Jeremy Cook, chief economist at the currency company World First, said: “Monetary policy has been held once again this month, as the MPC continues to plough a furrow of inaction.

“The economy is pounding a long at a decent rate, inflationary pressures seem to have subsided - for now at least - and the jobs market is improving well. However, the MPC has continued to adopt a laissez faire approach, it’s very much a case of ‘don’t move it! I’ve only just got the damn thing working'!"

Cook said that he expected interest rates to remain at their 0.5% historic low "for around 12 months", adding: “But that does not mean that dissenting voices on a number of issues will not come to the fore earlier."

Demand from home buyers remains strong as figures from Nationwide showed that house prices rose by 10.9% year-on-year in April, while figures from Halifax show that they rose by 8.5%.

According to the Royal Institution of Chartered Surveyors (RICS), house sales have lifted to their strongest levels in six years as expectations that property prices are set to lift higher broaden out across the country.

Some 23 homes were sold per surveyor on average in the three months to April, marking the highest figure seen since February 2008.

Meanwhile, the Organisation for Economic Co-operation and Development (OECD) warned that action may be needed to cool the housing market, suggesting that George Osborne's flagship Help to Buy mortgage guarantee scheme should be restricted.

The OECD said the minimum requirement put down by homebuyers under the initiative ought to be increased.

Last week, Bank of England deputy governor Sir Jon Cunliffe warned that the surging property market could pose the biggest danger to the country's financial stability.

Sir Jon Cunliffe said it would be "dangerous to ignore the momentum that has built up in the UK housing market".

The Bank has already tried to put the brakes on by withdrawing the Funding for Lending scheme, which widened access to mortgages last year by giving lenders access to cheap finance. It has been redirected purely to business loans.

Another measure has seen a new power created to be able to vary the affordability criteria that borrowers must meet, to ensure that they can afford to service mortgages if interest rates rise.

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