House prices are clearly cooling and mortgage rates rising, Mervyn King, Bank governor, said yesterday. Financial Times

Investment in both residential and commercial property is also likely to fall “possibly quite sharply”, he added, reiterating warnings made earlier this year.

King said house price growth had had to slow because it had been rising at unsustainably high rates.

'We needed to get away from the period when we saw double-digit growth. We needed a cooling in the housing market; how far it goes remains to be seen,' he said.

He added that prices had risen so rapidly and so strongly over the past decade that “it would need quite a significant fallback to erode the cushion of equity that most owners have in their home”.