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LONDON (Reuters) -Bank of England Deputy Governor Jon Cunliffe said on Wednesday the central bank was seeing evidence of a slowdown in the housing market.
House prices have been increasing at double-digit rates annually but there have been signs of a potential slowdown, with Bank of England data on Tuesday showing a sharp drop in mortgage approvals in April.
"We see evidence of a slowdown in the housing market. There are some straws in the wind that show the market is starting to turn," Cunliffe said in an interview with ITV News.
"The Bank expects the economy ... to slow quite a lot over next year or so and I think that will have an impact on the housing market."
Mortgage lender Nationwide said on Wednesday British house prices surged again last month but a slowdown, caused by the worsening cost-of-living crunch, is likely on the way.
Cunliffe said he was "certainly not predicting a crash in house prices".
"When rate of increase goes down, that is a correction, and then there’s a question of whether house prices rise faster than other prices,” he said. "We are seeing inflation at very high rates so actually in real-terms you could find that house prices are going down quite substantially."
British consumer price inflation hit a 40-year high of 9.0% in April, and financial markets expect the BoE to raise interest rates to at least 2% by the end of the year from 1% now.
Asked if the era of cheap borrowing had come to an end, Cunliffe said: "We have to ensure that the inflation we are seeing in the economy now ... doesn’t become the new normal."
"So interest rates may well have to rise further," he said, adding that he did not think Britain was heading back to the interest rates of the 1990s, when the bank rate ranged between 5% and 14.88%.
(Reporting by Kylie MacLellan)