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Not Bank of England's role to regulate house prices - policymaker

By Huw Jones

LONDON (Reuters) - The Bank of England should not try to regulate house prices, a BoE policymaker said on Monday, just hours after a property website reported that asking prices in London jumped 10 percent over the past month.

The BoE's Financial Policy Committee (FPC) is tasked with spotting and pricking asset bubbles, and is already under pressure to rein in Britain's housing market at a time when a new government mortgage guarantee scheme risks raising prices further.

Widespread aspirations to home ownership in Britain make property a major driver of the economy. But house price rises in London in particular, which attracts foreign property investors, have driven up rents and put home purchases out of the reach of many relatively well-paid workers.

Last month the Royal Institution of Chartered Surveyors suggested the FPC should cap house price inflation at 5 percent a year - a request which Martin Taylor, an external member of the FPC, said had "astonished" him.

"I don't think, personally, that it should be the FPC's job to stop house prices going up," Taylor said in a speech.

"Indeed, if you have an economic recovery, rising numbers of households and very tight supply - all of which we seem to have at the moment - it would be surprising if they didn't."

For now rapid house price rises are concentrated in London and neighbouring areas, while in the rest of Britain prices remain well below their pre-crisis peak.

Property website Rightmove said on Monday that asking prices for homes in London jumped 10.2 percent between early September and early October.

This was the biggest monthly jump since the series began in 2002 and took annual price growth in the capital to 13.8 percent - yet gains in most other parts of the country lagged inflation.

However, the FPC said in September that there was no immediate danger of a national housing bubble, and it lacks a clear mandate to tackle localised house price rises that do not threaten national financial stability.

If the FPC does want to take action, the first real step it could take would be next September when it reviews the government's Help to Buy scheme.

The scheme offers loan guarantees to home-buyers struggling to make a down payment on properties worth up to 600,000 pounds. Lowering this limit would reduce the number of London properties that benefit, without affecting most purchases elsewhere.

However, Taylor indicated that it was an open question as to whether the FPC "might, or even ought to, do something about the more excitable conditions now visible in the housing market in some parts of the country."

Taylor said that the BoE was more concerned that borrowers were taking into account that central bank interest rates would at some point rise from their current record-low 0.5 percent.

"We are watching for signs of over-extension on the part of the banks and the public, especially signs that borrowers were not in a position to withstand an eventual rise in interest rates, signs in general that a more speculative market might be developing: these might be expected to attract our attention," Taylor, a former CEO of Barclays bank, said.

(Editing by Ruth Pitchford)