Yesterday, Bank of England governor Mark Carney outlined the Financial Policy Committee’s powers to recommend banks and building societies tone down high loan-to-value lending and other areas of perceived risk. He also announced a consultation on the FPC’s ability to control lenders’ affordability tests.
BSA head of mortgage policy Paul Broadhead said such blunt regulatory interference will fail to take into account the individual circumstances of the borrower.
He said: “It could undo the good work mutuals have done in the first-time buyer market. It could prevent creditworthy first-time buyers getting into the housing market because the Bank intervenes directly.”
Limits on a mortgage loan-to-value or loan-to-income are not appropriate tools to manage financial stability, he said, and the Bank should consult before using them.
Mutuals boosted gross mortgage lending by 32% in the ten months to October, with advances of £33.9bn. Overall, the mutual market share grew to nearly a quarter, compared to 22% in the same period of 2012. One in three loans went to first-time buyers.
Gross mortgage lending last month also jumped 32% year-on-year, with advances of £4bn.
The figures come a day after the Bank of England announced the Funding for Lending Scheme will be redirected away from household lending.
Broadhead said Funding for Lending is unlikely to have a significant impact on the mutual sector: “It is unlikely that this change in isolation will have a significant impact on the availability of mortgage finance.” However, the withdrawal of cheap funding for lenders could push up interest rates in the longer-term, he added.
