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Chancellor upbeat about housing sector slowdown

The housing and home loans market will continue to cool throughout the year, chancellor of the exchequer Alistair Darling said yesterday.

However, he also told parliament that a crisis was unlikely due to the underlying strength of the sector.

The role of the Bank of England - which also decided to maintain interest rates at 5.25 per cent yesterday - in the credit crunch was also commented on by Mr Darling.

Lenders have been less willing to advance credit to each other on the money markets - pushing up the inter-bank, or Libor rate.

This has had a trickle-down effect on the high street, with home loans firms becoming more selective about who they allow to borrow from them.

"The Libor rate…is of course something the Bank of England keeps under constant review," Mr Darling assured the Commons.

"I believe the housing market in this country, although it will slow down, is fundamentally strong," he added.

"It's true that house prices are slowing down, but this is on the back of many years when house prices have been growing at 10 per cent or even more in some parts of the country for many years."

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