One of the unplanned but most intractable legacies of the Blair decade is the distortion of any normal or sustainable relation between house prices and people’s incomes. If that link is not already broken it is certainly stretched to the limit.

The rate of price inflation may be slowing, just, but remains obstinately high.

The question that always accompanies fresh data showing a fast-growing housing market is: are we headed for a crash? The short answer, at present, is no.

Yesterday’s quarter-point rise in rates will not make much difference and was not intended to. Few of the most vulnerable borrowers pay higher mortgage interest immediately just because the Bank’s rate has gone up.

BACKGROUND

• Will further interest rate cuts boost the housing market next year?

• A guide to the housing market forecasts

• The property market: a bleak future?

BACKGROUND

• All set for slowdown

• Homes in N Ireland rise 54% to London levels

• House prices: top hotspots ... and the coolest

• What do Chelsea and Belfast have in common?

The London property market

BACKGROUND

• Is the property boom finally over?

First-time buyers priced out

Houses will become completely unaffordable for first-time buyers unless many more are built, a national advisory unit says

• Reform of planning rules ‘vital’ to meet growth in demand

• How the mortgage market has changed

• The future of house prices: 10 times pay

BACKGROUND

• Property prices grow at slowest rate in five months

• Buying a house 'will cost 10 times your income'

• How the mortgage market has changed

• First proof of decline in housing market

• Buy-to-let brigade could be the joker in pack

No one is suffering as much as first-time buyers

Lenders are getting more picky, yet property prices are refusing to fall far enough, fast enough

BACKGROUND

• First proof of decline in housing market

• Fresh signs of cooling housing market

• House prices slow despite London surge

BACKGROUND

• Mortgage slowdown triggers house price fears

• Buy-to-let tax shock

• Fall in mortgages raises fears of slowdown

• Signs emerge that UK housing is off the boil

• Interest rates put brake on house prices

End of house price boom is in sight

Societies saw an 8% drop in mortgage approvals last month compared with a year ago, the first such fall since 2005

BACKGROUND

• Nationwide says slowdown may limit price rise

• House prices keep on rising

• Your guide to surviving the rate hike

• The return of negative equity?

Housing costs taking their toll

The question that always accompanies fresh data showing a fast-growing housing market is: are we headed for a crash?

A run of four rate rises must, however, put more pressure on new buyers. Allowing for high prices and higher interest rates, they are likely to have to pay a fifth more interest each month than a year ago.

But in London, which is again driving the price increases, interest rates have the least effect because far more properties are bought with bonuses or foreign money.

The squeeze on incomes must eventually tell. Next month’s new selling regulations may cool the market a little more. But there will not be a price crash unless there is a much sharper rise in unemployment than currently looks likely.

Nonetheless, there will be a price to pay for the continuing rise in house prices. As existing borrowers see their budgets stretched, consumer spending and economic growth will suffer, perhaps at just the wrong time. And more people will be excluded from decent housing.

This will not only raise shrill demands for regulation and subsidy. It has a social cost for those excluded from the housing market.

First-time buyers and lenders are resorting to evermore bizarre and unwise tactics to get a foot on to the bottom of the property ladder. Buy-to-let investors are pushing up the price of flats and houses, making it harder and harder for young people to buy a home.

So long as house price inflation outpaces growth in ordinary people’s incomes, the drive to buy at almost any financial or personal cost will continue. General inflation was only beaten when people became convinced that policy would keep price increases low and relatively stable.

At root, the problem is a chronic shortage of housing in key areas. There is a need for many more homes in London and other cities.

Homeowners may not want this to happen, hoping instead to be bailed out by inflation. But the price we pay for the rising housing market is more than just economic.

It’s the letter but not the spirit

In cutting loose Lord Browne of Madingley, Goldman Sachs has passed up the chance to show leadership, loyalty and a little humanity.

To be fair, the world’s premier investment bank faced a vexing decision. Since 1999, Lord Browne has been a member of the bank’s board and has also served as chairman of the audit committee as well as a member of the corporate governance committee. His role at Goldman Sachs has not simply been to provide strategic advice but to uphold the integrity of the firm.

Lord Browne has compromised his own integrity in the most sorry circumstances, by misleading a court to keep from the press the details of a relationship with a former gay lover. When the news of his lie emerged last week, Lord Browne resigned as chief executive of BP. That same day, Martin Halusa at Apax showed his mettle by giving an instinctive and unequivocal endorsement to Lord Browne, who is joining the private equity firm this summer. (Private equity, you see, is capable of compassion.)

For nine days, Goldman deliberated and dithered. Eventually it concluded that the institution was more important than the individual. It judged that it could not hope to insist on honesty from its staff while retaining a director who lied to a court. And it fretted that pious US regulators would object to Lord Browne’s continued presence on the board.

Goldman’s position is sensible but cowardly.

Lord Browne’s lie was a pathetic fib to cover up a misplaced secret. In this case, his integrity as a businessman has never been in doubt.

The clients of Goldman Sachs will wonder how much loyalty the bank will show them if they ever find themselves in a spot of difficulty. It is also, surely, the first time that Goldman Sachs policy has been dictated by the sordid agenda of the Daily Mail. Instead of standing by a distinguished businessman and showing compassion for a man in a moment of frailty, Goldman Sachs has chosen to be a stickler for the rules.

Credit risk

The EBRD was a great idea whose time is now over. Over the years, it has been hugely successful, fulfilling its mandate by venturing into deeply sub-prime territory from the Baltic to the Black Sea. It gave credit boldly where no loan officer had been before and it has paid off. The bank made a profit of $2.4 billion last year. The “transition” countries of Eastern Europe are now mainly EU members, solvent and acceptable territory for commercial bankers requiring five-star hotels and a decent lunch. The question for EBRD is: what now?

One option is expansion across Central Asia to the east and into the Middle East to the south. It could do both but could easily come unstuck. Its early stamping ground was in states committed to a “transition” to free political expression. But how is it to support “transition” in states where there is no commitment to democracy?

Commercial bankers love to have a soft lender on board in “difficult” countries, lending credibility and oversight to risky projects. Without clear guidelines and political direction, the EBRD could find itself endorsing dubious regimes for the benefit of commercial bankers. It is not what the taxpayers who fund the EBRD are looking for.

George Osborne is right to want to scrap stamp duty on shares. It’s a drag on savings and punishes thrift. It also puts conventional long-term share buyers at a disadvantage to speculators who dodge it by using fancy derivatives. But before the Shadow Chancellor gathers up plaudits from a grateful City, he needs to say whose feathers he will be plucking instead to make up for the annual £3.7 billion forgone.

james.harding@thetimes.co.uk

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