BoE's Bailey - Britain's housing market not out of control - paper

LONDON (Reuters) - The Bank of England is watching Britain's fast-rising housing market closely and has the tools to take the heat out of it if it gets out of control, the central bank's Deputy Governor Andrew Bailey said in a newspaper interview published on Sunday. The central bank was pleased Britain's economy was showing signs of sustained growth, but policymakers had to make sure the recovery did not rely too much on property and related consumption, he told the Sunday Telegraph. "We are very focused on the housing market," Bailey said. "We don't think that at this stage the situation is out of control. We have laid out the tools that we can use. The thing I stress is that we will use those tools." Keeping rising property prices under control without holding back the rest of the economy is one of the biggest challenges facing the BoE. "We have to be very careful about the balance of growth. It is very much dominated by the housing market and the consumption that is attached to that," he said. "Our job now of course it to ensure that recovery is sustained and it is sustained in a way that does not become imbalanced and stack up problems for the future." Record low mortgage rates and a sharp economic upturn have lifted annual house price inflation in Britain to almost 8 percent, according to mortgage lender Halifax. London and parts of southeast England are recording even steeper gains, stoking fears of a bubble. BoE Governor Mark Carney warned earlier this month that Britain's housing market had a history of moving "from stall speed to warp speed". Carney has been clear that he wants to use macro-prudential tools, which target systemic risks, rather than interest rates to rein in the property market. Bailey also told the Sunday Telegraph that Britain's banks had substantially strengthened their capital positions during 2013. (Reporting by Peter Griffiths; Editing by Andrew Heavens)