* Weale concerned about recent buoyancy in house prices
* Low interest rates may cause unsustainable price rises
* Half percentage point rise in CPI expectations would be worry
By David Milliken
LONDON, Oct 15 (Reuters) - A Bank of England policymaker expressed concern about the rapid pace of recovery in Britain’s housing market on Tuesday, shortly after data showed the biggest jump in property prices in almost three years.
“I am concerned about the recent buoyancy of house prices, although relative to incomes ... they’re lower than they were during the peak,” Martin Weale told lawmakers.
Very low interest rates risked pushing prices up too fast, he added.
“You would expect low interest rates to push house prices above the long-term sustainable trend,” he said. “People who are taking on mortgage debt do need to be sure that they can afford to look after it, even if interest rates eventually return to what we regard as normal levels.”
Britain’s Office for National Statistics said earlier on Tuesday that house prices rose 3.8 percent in the year to August, the fastest rise since October 2010. London drove the nationwide increase as prices in the capital jumped 8.7 percent.
The launch of a state mortgage guarantee scheme last week is expected to boost prices further.
Several top policymakers at the BoE, including Governor Mark Carney, have sounded less concerned than Weale about the housing market in their recent comments.
Weale also reiterated his view that pledges by central banks to keep interest rates on hold for a long period - as undertaken recently the BoE - risk pushing up inflation expectations.
“The policy of forward guidance, if not carefully designed, could have the effect of raising inflation expectations, and obviously we were all concerned that that shouldn’t happen in the British economy particularly given the recent history of inflation,” he said.
Weale was the only Bank of England policymaker to vote against the guidance plan in August. He argued that allowing inflation to be 0.5 percentage points above the BoE’s 2 percent target in 18-24 months time would be too lax, and should cancel out the Bank’s pledge to keep interest rates on hold.
In his appearance before the Treasury Committee on Tuesday, Weale also gave details of what he thought would activate another of the “knock out” clauses in the BoE’s guidance plan - whether medium-term inflation expectations were no longer well-anchored.
“I would regard a clear movement of even half a percentage point as highly significant. For me, it’s important that people expect the Monetary Policy Committee to deliver its target of 2 percent inflation,” he said.