When Mike Carney left the Bank of Canada to become Governor of the Bank of England, he made it clear that he was bringing his old economic policies along for the ride. In both cases, he provided forward guidance that interest rates would be kept extremely low and that other programs would help low-income home buyers, reports John Greenwood for the Financial Post. While the policies have helped the UK turn its economy around, there is growing concern that growth has come at the cost of a new housing bubble.

Housing Bubble

Housing bubble in UK

For anyone who paid attention to Carney’s policies at the Bank of Canada, none of this should come as a surprise. His reputation is largely built on the fact that Canada came through the crisis without a serious recession, but those same policies have left Canadians with record levels of debt. The British are also taking advantage of ultra-low interest rates, previous government programs that provided zero interest loans, and government-backed mortgages to buy homes, but this is pushing housing prices to pre-crisis levels. With so much credit going around, the economy is improving, but not everyone is happy.

Housing cost in London

Housing costs in London went up by 10 percent just in the last month, the Daily Mail reports. The newspaper blames the increase on foreign investors speculating on prime real estate to get their money out of the Eurozone, but that would have made more sense six months ago than it does now. If London sees a downward correction soon there might not be much cause for worry, but 10 percent price jumps aren’t sustainable, and the longer they last the more damage can be done when they collapse.

It’s not just a matter of changing popular sentiment. Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY) CEO António Horta-Osório has raised concerns that Carney’s approach is fueling a housing bubble, as has the International Monetary Fund, echoing warnings Carney himself made regarding Canada. It would be a cruel bit of irony if the celebrated central banker brought in to repair the damage from Britain’s last recession caused the next one by letting housing prices get out of control.