Bank of England cuts mortgage support to avoid bubble
Bank of England says it will refocus Funding for Lending scheme on helping smaller firms
The Bank of England moved to head off the risk of a bubble in house prices yesterday, making a surprise announcement that it would put the brakes on a scheme launched last year to boost mortgage lending.
Shares in British construction firms tumbled after the central bank said it would refocus the Funding for Lending Scheme on helping small companies that find it hard to borrow.
Britain's economy and its housing market have staged an unexpectedly strong turnaround since the scheme was launched by the bank and finance ministry in July last year to spur lending to home-buyers and businesses.
Another, much-criticised, government programme to aid the housing market, Help to Buy, remains in place.
"We did not see an immediate threat coming from the housing market but we are concerned about the prospective evolution of the housing market," BOE governor Mark Carney said.
"The concern is where this could go. We definitely see some short-term momentum," he said, adding the BOE was prepared to take "larger measures" to tame rising house prices if needed.
Carney said it would "no longer be appropriate or necessary for us to have our foot on the accelerator" in terms of spurring mortgage lending. "It's better to shift into neutral."
