News Column

Coutts-Chancellor to give FPC power to set cap on mortgage values

June 13, 2014

ENP Newswire - 13 June 2014

Release date- 12062014 - Chancellor to give FPC power to set cap on mortgage values.

Ex-Bank of England Governor Sir Mervyn King didn't want them, but Dr.Mark Carney is going to get them. In his Mansion House speech due to be delivered this evening George Osborne will give the Bank of England'sFinancial Policy Committee (FPC) powers to limit the size of mortgages as a proportion of incomes or property values.

Speaking before the event the Chancellor stated: 'Our economic plan has brought stability and security and I'm not going to let anything undermine that.' Nevertheless, Osborne will also indicate that real estate does not pose an 'immediate threat'.

The most recent data on lending show that loan-to-value ratios continue to be comfortably below their peak, but not so loan-to-income ratios which are at a new high. In parallel Councils will be asked put in place pre-approved planning permissions for brownfield sites which are suitable for housing, thus speeding up what some believe is a significant obstacle to freeing up the existing supply of land and thus new housing.

On June 5th the International Monetary Fund published new research which showed that macroprudential tools such as the above caps on loan values 'are somewhat effective in cooling off both house prices and credit growth in the short run', where as the evidence regarding the impact which higher capital requirements have on lending to specific sectors has on credit growth is mixed.

The Washington-based lender also argued that 'macroprudential tools may also not be effective to target housing booms that are driven by the shortage of housing or by increased housing demand from foreign cash inflows that by-pass domestic credit intermediation.' AB

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Source: ENP Newswire

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