Mr. David McWilliams:

The first quote on this was in an article in 2000, where I stated we could create a simple rule which would make sure the banks did not over-lend. At the moment, if an individual's house price increases, the bank can loan more against it. That is a built-in inflationary mechanism. In 2000 I came up with a backward looking house price index whereby the last house price increase was divided by the average of the index and then multiplied by the loan-to-value ratio, which means that the increase in prices reduces the amount of money that can be lent. It would be a dynamic system which could regulate itself. That is how one should do it. It is a simple statistical rule and it would be unbelievably easy to put in place. It would strangle house price inflation because house price inflation would limit the amount of money that could be lent. That is the sort of regulation we need.