The Bank of England wants major new powers to cap mortgage loans, yesterday arguing it may need to rein in the housing market if the price boom starts to endanger banks.
Officials want the ability to cap the loan-to-value (LTV) ratio of mortgages, as well as the debt to income ratios of some borrowers.
The demands came as the Bank approved George Osborne’s Help-to-Buy (HTB) Scheme – the chancellor had asked officials to review the policy, which offers subsidies to house-buyers with small deposits.
The scheme loans first-time buyers up to 20 per cent of the value of a house for a down payment, and critics fear it is pumping up the housing market and risks losses for the taxpayer.
But the Bank’s financial policy committee believe the housing market is not yet a danger.
“Volumes of lending remain small relative to experience before the financial crisis: high LTV loans, including HTB mortgages, have accounted for nine per cent of new mortgages in the year to date, compared to roughly 25 per cent in 2007,” said governor Mark Carney.
And he praised it for opening up the market to those with small deposits.
“The scheme has led to a return of lenders to the high (above 90 per cent) loan to value (LTV) market.”