Bank warns of house slowdown

Bank of England Deputy Governor Rachel Lomax has added her voice to the chorus warning of an imminent fall in house prices.

Lomax said the housing market was facing a "significant slowdown".

"We monitor a full set of housing market indicators and we have found that the clearest signals come when all of the indicators are pointing in the same direction," she said in a speech to the North Wales Business Club.

Her comments echo those of Barclays and Deutsche Bank earlier this week, which predicted falls of 15-20% over the next year.

The Bank of England's monetary policy committee also forecast falling property values, earlier this month.

"This year, rising oil prices and a significant slowdown in the housing market have awoken bad memories of the 1970s and 1980s. The MPC will be doing well if it can achieve the same stability over the next decade as we have over the past 10 years," she said.

Countering recent criticism from the House of Lords Economic Affairs Committee, which said the MPC was holding interest rates too high, Lomax said the committee took into account a large volume of indicators and data. But she made plain the bank was still unhappy with some of the statistics it received, particularly from the ONS.

She said the Bank was at odds with the ONS over its initial estimate of

0.4% for third-quarter growth. "The MPC judges overall growth was a little higher than the official data currently indicate," she said, adding that the signs were that manufacturing was still growing.

The ONS is to publish updated estimates on Friday. The Bank is working closely with it to improve the quality of data, in particular in the services sector where research has shown that private-sector surveys may be more reliable.

ONS chief Len Cook, who has faced a barrage of criticism from MPs over data inaccuracies and revisions, recently revealed he is leaving at the end of next year to return to his native New Zealand.

Lomax said: "ONS needs to be proactive in measuring activity in new sectors, even if it is not straightforward - as it often won't be."

"Improving the quality of macroeconomic data is a first-order issue for monetary policymakers. So Bank of England staff will play an active role in supporting these developments."

However, she mitigated her remarks by saying part of the problem was the need to get data out quickly.

"The fact remains the data that give the timeliest read on economic activity are also the ones that are measured least accurately.

"So there is always a risk the official data will give a misleading view of the current economic situation."