Writing in the FT, Paul Tucker, the deputy governor for financial stability at the BoE said:
“Outright bans on households taking out loans with high LTVs, including banning families borrowing from outside the UK financial system, would, in the view of many of us, be a matter not for the Financial Policy Committee (FPC) but for government to pursue directly.
“The higher the requirement [of the sectoral capital tool], the closer it approximates to constraining portfolios of high LTV loans. But it would not cut across lenders’ judgements on the creditworthiness of individual borrowers,” he told the FT.
The FPC will be established within the BoE to monitor and respond to systemic risks proposed within the Financial Services Bill, which was published in January.
The government plans to hand the FPC macro-prudential tools “to help dampen down a credit boom or to help in a credit crunch…it will be able to alter the maximum loan-to-value ratios in mortgage lending in order to curb an unsustainable rise in house prices,” according to financial services secretary, Mark Hoban at the time.
The Council of Mortgage Lenders said in its News and Views, decisions made by the FPC could therefore have far reaching effects on lenders, consumers, mortgage and housing markets, and on the economy as a whole.
Earlier this month, during a Treasury Select Committee (TSC) hearing on the Mortgage Market Review, FSA chairman Lord Turner confirmed the Financial Policy Committee will make a statement in “the next few weeks” on whether it plans to impose LTV or income multiple caps on mortgages.
