In his first policy speech since taking over at the head of the Bank on July 1, Mr Carney said: "A recovering banking sector, coupled with persistently low interest rates and new Government programmes, may lead to concern that the seeds are being sown for a new cycle in the housing market. The number of mortgage approvals for house purchase is up by 20% on a year ago, while house prices have risen by 5% over the same period - and by more than that in some parts of the country."
Addressing a business audience at the East Midlands Conference Centre in Nottingham, he argued these increases in mortgage approvals and house prices must be kept in perspective. Mr Carney said: "Mortgage approvals are currently running at only a little more than half, and transactions a little more than two-thirds, of pre-crisis levels. Households' debt servicing costs relative to income are below their 20-year average, and houses cost the same relative to earnings as they did in 2003."
However, he added: "The Bank of England is acutely aware of the risk of unsustainable credit and house price growth, and will be monitoring it closely."
He emphasised the Bank could now supervise lending to specific sectors more intensively, make recommendations to banks and building societies to restrict the terms on which new credit was provided, or even raise capital requirements on mortgage or other types of lending.