| LONDON, June 26
LONDON, June 26 Sterling climbed towards recent
six-year-highs against the dollar and housebuilding stocks rose
on Thursday after Bank of England measures to cool Britain's
housing market left interest rate expectations unchanged.
The BoE's risk watchdog, the Financial Policy Committee
(FPC), sought to put the brakes on a housing market that many
fear is overheating by toughening mortgage affordability tests
and announcing a cap on home loans.
But the measures, announced in the FPC's twice-yearly
financial stability report, were not as aggressive as some had
feared. Tougher action might have pushed expectations of when
British interest rates will start to rise from record lows
further into the future.
The FPC's measures sent sterling to a day's high against the
dollar of $1.7036 from around $1.7010 beforehand. The
euro also hit a day's low against the pound of 79.90 pence
as BoE Governor Mark Carney spoke after the report's
release at a news conference.
"The main concern for sterling traders was whether the
macroprudential norms would impact interest rate hike
expectations," said Nawaz Ali, an analyst at Western Union.
"Clearly they have not, much to the relief of traders. These
measures do not alter the MPC (Monetary Policy Committee) debate
on hiking interest rates."
British gilt futures extended losses and hit a day's low
after Carney's comments. The September gilt future
bottomed at 109.84, before edging back up to 109.95 - down 17
ticks on the day.
The sterling overnight interbank average rates were still
pricing in the chance of a rate hike before the end of the year,
unchanged from before the measures were announced.
Carney said he expected momentum in the housing market "to
continue for the next year or so" and added that it was not the
FPC's role to control house prices.
Stocks in British housebuilders, including Barratt
Developments and Persimmon rose over 5 percent
after Carney said he saw further momentum in the housing market.
Although Carney said the central bank had reached "the limit
of (its) tolerance" on projected increases in mortgage debt,
some argued its actions were not tough enough.
"Many will argue today's measures don't go far enough," said
Tom McPhail, head of pensions research at financial services
firm Hargreaves Lansdown. "Mark Carney stressed that if someone
could get a mortgage yesterday they could get one today."
(Additional reporting by Anirban Nag and Andy Bruce; Editing by