The Bank of England’s latest report on the country’s financial stability is released this week, with the potential for fresh action to cool London’s frothy housing market.
The Bank’s financial policy committee (FPC), which is chaired by governor Mark Carney, releases its twice-yearly outlook in systemic stability on Thursday. The governor and other policymakers have previously said that the housing market poses the biggest domestic risk to the financial system, and the report provides the first obvious opportunity for any new regulatory action.
House prices in London rose by an astonishing 18.7 per cent in the year to April, according to official figures, against an increase of only 6.3 per cent outside of the capital and the south east.
The FPC has some powers of direction, which means it can instruct regulators to raise banks’ capital requirements for individual sectors, like mortgage lending. It can also recommend action to regulators or other branches of government on practices it thinks could be destabilising.
“There is a chance that these decisions will be put on hold until the committee’s September meeting, amid a few signs that the market is already cooling,” said analysts at BNP Paribas. According to the Council of Mortage Lenders, lending last month rose 12 per cent from May last year, but is down from October’s recent peak levels.