A leading expert in the Bank of England has stated that fears of a "house price bubble" are quite frankly premature.

Kate Barker, who was commissioned by the Government to investigate the housing market says: "While UK house prices are certainly at historically high levels at present, relative to incomes, there are factors which support an increased equilibrium price: lower interest rates lowering the initial cost of a mortgage; low long-term real interest rates (which have increased the asset value of housing); an inadequate supply of new build; increased use of housing as a savings vehicle for pensions.

"There are some signs which might indicate a housing bubble - increased private buying of housing for letting with the expectation of capital gain, and parents using equity from their own homes to assist children with deposits - but it is not clear how far these may have contributed to higher prices," she added.