Minouche Shafik: Interest rates ‘wrong tool’ on housing

Rate rises should not be used by policymakers to slow Britain’s overheating housing market, a senior Bank of England official says.

Dame Nemat “Minouche” Shafik, deputy governor of the Bank of England, ruled out raising rates — still at historic lows of 0.5% — to slow the rocketing price growth.

“We should use other tools, and fortunately we have other tools,” she told the BBC.

She added that the bank had other means at its disposal to limit household borrowings and reduce banks’ ability to make risky loans with high loan-to-value ratios.

House prices show no signs of slowing after rising annually by 9.7% last month — higher than the 8.6% rate recorded in September.

Shafik, a member of the monetary policy committee which decides on interest rate levels, also said the bank could take interest rates even lower or roll out more quantitative easing if the economy took a turn for the worse. She is one of only two women to sit on the nine-person committee — the other being American economist Kristin Forbes. “It’s a bit like Noah’s Ark, we come in pairs,” she said today.