Professor Philip Lane:

This is why it is impossible to have an exponential, ongoing rate of increase in house prices. We know incomes cannot grow at that rate. Let me go back. Given the tragic history of what happened here, it is so tempting to be fearful whenever the price of houses goes up, and to say it will trigger extrapolation and a self-sustaining spiral. This is why the loan-to-income ratio is fundamental. Incomes cannot spiral upwards, therefore mortgage levels cannot spiral upwards in this context. That is why there is a limit. With the loan-to-value ratio and the deposit requirements, again people's deposits cannot spiral upwards. They have to save those deposits, so it is impossible to have that spiral in the same way. A degree of predictability is needed in our rules, and this is why a once a year review is good way to do it. Going back, I have said that if we see a material change we will change the rules, but on a once-a-year basis. Doing so more frequently than that is not a good idea.