Plan to stop permanent growth of mortgage red tape is rejected

Tim Wallace
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PLEAS for a sunset clause to be introduced on lending restrictions were pushed aside yesterday, as the Bank of England published its decision on mortgage loans.

The Building Societies Association is worried new regulations will be introduced when the housing market is overheating, then never withdrawn when the market cools down.

To combat this permanent growth in red tape it wanted a sunset clause on the new restrictions on loan-to-income ratios, acting as an inbuilt restraint on regulation.

But the Bank of England’s prudential regulation authority yesterday turned down the demand, arguing it will “keep the operation of the policy under review as part of its normal functions” in yesterday’s policy statement.

“The sunset clause we wanted has not been included, but with or without it this measure should not become a permanent feature of the market as conditions change,” said the BSA’s Paul Broadhead.

The mutual lending group did welcome the Bank of England’s move to take some smaller lenders out of the restrictions on loans.

Any lender giving out fewer than 300 mortgages per year will no longer be subject to the restrictions, as it is too small to represent a threat to the financial system.

The rules mean no more than 15 per cent of a lender’s new mortgages can be bigger than 4.5-times the borrower’s income, in a bid to stop the market overheating dangerously.

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