Bank 'no power' on top London homes
The governor of the Bank of England has admitted it is powerless to control soaring prices of prime property in London.
Mark Carney played down fears of a bubble in the wider market, dismissing suggestions that the coalition's controversial Help to Buy scheme was having a significant effect.
But the governor made clear that when it came to the boom in the most desirable areas of the capital, which many blame for stoking prices elsewhere, the Bank could do little more than "watch".
"The top end of London is driven by cash buyers," he told the BBC's Andrew Marr Show. "It's driven in many cases by foreign buyers.
"We as the central bank can't influence that. We change underwriting standards - it doesn't matter, there's not a mortgage.
"We change interest rates - it doesn't matter, there's not a mortgage, etc. But we watch and we watch the knock-on effect.
"I will say that if you look at the UK as a whole everywhere, bar Northern Ireland, we are now seeing house prices begin to recover."
Figures from the Rightmove website last week found the average asking price in England and Wales has risen by some £14,000 over the past year to £243,861.
A report from estate agents Savills and analysts Property Database also found that average prices in 43 areas have broken the the £1 million barrier - 34 of them in London, and the remainder in the commuter belts of Surrey, Hertfordshire and Buckinghamshire.
Mr Carney said the Bank had to set its policy for the "entire country", and the wider market was seeing an "adjustment from very low levels".
Prices relative to income were still below their peak "even in the hottest parts".
"But we have to be very conscious and we are very conscious of the history, the economic history in Britain, and there is a history of boom and subsequent bust in the housing market," he said.
"That's one of the reasons why the Bank of England has been given additional powers and one of the reasons, as of last November, we started to use those powers.
"So we've tightened up on underwriting standards, we've tightened up on capital standards, we've taken away special stimulus programmes that existed before."
In November the Bank and the Treasury announced that financial institutions would no longer be able to use the Funding for Lending (FLS) scheme to support mortgage loans.
But Mr Carney indicated there was little prospect of Help to Buy being reined in, describing its impact as "pretty small".
"It's all outside of London. It's for lower priced houses as a whole and it's mainly first-time buyers," he said. "So it's not driving the housing market, but we have a responsibility to watch it and we will speak out if we are concerned."
Mr Carney, who last week revised the Bank's forward guidance policy to make clear that interest rate rises were not imminent, again stressed that when they did come, increases would be "limited and gradual".
"The path of interest rates is going to be calibrated very carefully to ensure that only when we see sustainable growth in jobs, in incomes and in spending will we make adjustments," he said.
The governor also urged greater deferring of City bonuses, after Barclays was criticised for raising payouts despite falling profits.
Mr Carney declined to comment on individual banks, but said: "We think with compensation of bankers that a substantial proportion and an increasing proportion as they become more senior, as they take more risk, should be held back.
"You can call it a bonus, but we actually look at it a little differently - it should be held back, it should be deferred.
"It should be deferred for a very long time and there should be the ability, and in fact we have the expectation, that the firm will take back that compensation if the individual is subsequently found to have taken risks that weren't well understood."
He added: "We think more deferral and for a longer period of time is the right way to do it."
Mr Carney was asked if people were right to be "worried" by the prospect of an in-out referendum on EU membership - which David Cameron has promised to hold by 2017 if re-elected.
He said "uncertainty is always bad for investment" because it "increases the value of waiting".
"What we've seen over the course of the last five years is that businesses, even when they've had cash and had opportunities, they've held off investing," he said.
"The uncertainties that we can influence at the Bank of England is not a European referendum or a Scottish referendum.
"What we can influence are uncertainties about the financial system... uncertainty about the path of monetary policy.
"So what we're trying to do to the maximum extent possible is provide the comfort that we are not going to adjust interest rates until jobs, incomes and spending is really growing."