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Osborne threatens to cap mortgage LTVs

Loan to Value caps were put back on the table last night as George Osborne told MPs the Bank of England could intervene to prevent another housing crisis.
Speaking in the Commons, Osborne said that the Financial Services Bill would give a new Bank of England committee powers to “alter the maximum loan-to-value ratios in mortgage lending to curb a sharp, unsustainable rise in house prices,” the Telegraph reported.
The new Financial Policy Committee (FPC) would also be empowered to force banks to hold more capital to stop another credit bubble in progress.
“This FPC should act symmetrically… Its job is not just to try to moderate a credit boom but to try to alleviate a credit bust,” said Osborne.
“The precise tools we give to the FPC are yet to be determined. I freely accept that we are largely in un-chartered territory in policy making here or indeed anywhere in the world.
“But surely the experiment of making no attempt to moderate the credit cycle, let the bubbles grow and burst and then clean up afterwards, has been an unmitigated disaster and I think we would be failing if we didn’t look for an alternative approach.”

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The committee, which will assume responsibility for “monitoring risks across the system”, would be chaired by the Governor of the Bank of England.
Osborne revealed the proposals as MPs discussed the second reading of the Financial Services Bill.
The FPC, which has already been set up, will report back on the exact nature of its allotted powers in March.