News Column

Bank chiefs clash over mortgages

July 2, 2014

By James Salmon, Daily Mail, London

July 02--SENIOR officials at the Bank of England clashed over plans to prevent the housing market overheating, with some complaining that tighter restrictions on large home loans did not go far enough.

Yesterday it emerged that some members of the Bank's Financial Policy Committee raised concerns that lenders could assume it 'endorsed' riskier lending if it set a higher threshold on how much households can borrow in relation to their income.

The committee eventually agreed to ration risky loans by banning lenders from issuing any more than 15pc of their new mortgages at 4.5 times an applicant's salary or higher.

The crackdown was unveiled by the Bank last week but was far less hard hitting than some expected. Minutes of meetings held by the FPC on June 17 and 25 show some members also thought that the 4.5 times salary was too high and that the restrictions should be set at a lower level with lenders allowed to issue a higher proportion of their mortgages above this level.

Notes of the meeting stated: 'To the extent that there was a risk that the market might see whatever threshold chosen as one that the committee "endorsed" as sound from an underwriting threshold, there was also a benefit in choosing a lower threshold.'

Other members thought that there should be a higher loan-to-income threshold, but a very strict limit on the number of loans issued at or above this limit.

Business Secretary Vince Cable has previously said that a 'stable level' of lending is three to three and a half times salary.


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Source: Daily Mail (London, England)

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