New powers eyed for Bank of England over mortgages
Proposals aim to reduce the risk of overheating in the housing market and economic instability
Britain's government published proposals to give the Bank of England new legal powers to control residential mortgage lending last week, but said it wanted more evidence before deciding on a request by the central bank to regulate lending to landlords.
The proposals are in line with finance minister George Osborne's desire to give the Bank of England greater oversight of residential mortgage lending to reduce the risk that the housing market could overheat and destabilise Britain's economy.
"The government is proposing that the [central] bank is granted powers of direction for loan-to-value limits and debt-to-income limits for owner-occupied mortgages," Osborne said in a statement.
The Bank of England's Financial Policy Committee can already recommend limits on how much banks should lend mortgage applicants relative to their income and the value of their home.
Both the central bank and the government want to beef up the committee's powers by making such limits legally enforceable.
With a view to implementing the laws before a general election in May next year, the consultation will run until November 28. It was aimed at gathering the views of consumers and the finance industry, particularly on how debt should be defined for the purposes of the new laws, the finance ministry said.
In June, the committee urged banks to issue no more than 15 per cent of mortgages at loan-to-income ratios above 4.5 times a borrower's income.
It also said last month that it wanted the power to impose limits on buy-to-let mortgages.
But the government said last week that this would be subject to a separate consultation next year aimed at "building an in-depth evidence base on how the operation of the British buy-to-let housing market may carry risks to financial stability".
The decision to push back the buy-to-let consultation means it is unlikely that there will be sufficient time to enact any new laws on that subject before the election.