Don't panic, Captain!

Those of us of a certain age will well remember Corporal Jones's exhortation to Captain Mainwaring. However serious the problem, the loyal and trusty subordinate always advocated calm whilst running around like the proverbial headless chicken. And the problem was always solved by his colleagues - who didn't panic, rather than by Cpl J who of course always did.

I was reminded of this when reading about the BoE's warning that a rise in interest rates is more imminent than we may have thought. Governor Carney is by no means a Cpl Jones and doesn't appear to be a man who will panic, but I sense that there is an air of panic generally in the repeated references to a housing price bubble and the need to use interest rates to prick it.

I am fortunate to own property in London and the Midlands and whilst the rise in London prices is remarkable, I can assure you that it is not matched in the Shires. There may have been some upwards movement in the last 12 months but I don't think prices generally are much higher than they were before the recession. And what increase in activity there is may be quickly extinguished by a hefty rise in borrowing costs.

This, I guess, is the Governor's dilemma. We don't have one housing market, we have two: London and the rest. Using a sledgehammer to crack the South East nut may be sensible but it will, at the same time, cause immense damage to a less robust and slowly recovering housing market in the rest of the country.

The major reason for London residential property inflation is lack of supply. Solve that and prices will naturally stabilise. Restricting the availability of money by making it more expensive won't get new houses built; if anything it will achieve the reverse as developers take flight fearing that there will be a shortage of buyers. That is the last thing that we need.

We employ a substantial body of intelligent and highly paid people in both HM Treasury and the Bank of England. Now is the time for them to show their value by coming up with a more thought through and intelligent solution to this problem than jacking up interest rates. We must all say to Governor Carney - "Don't panic, Governor" and hope he listens.