According to the Monetary Policy Committee Minutes, the decision to stop cheap funding for mortgage lenders will not have an impact on monetary conditions.
The Minutes continued: “By removing direct incentives for banks to expand residential mortgage lending in 2014, the changes to the FLS provided support to the MPC’s policy guidance by reducing the risk of triggering the financial stability knockout.”
Under the Bank of England’s forward guidance, the Bank Base Rate will remain at 0.5% until unemployment falls to 7%. However, the policy may end if any of the so-called “knockout” conditions have been breached. These include a significant rise in inflation, or the view that monetary policy risks destabilising the economy.
MPC members assessed that house prices have been increasing at roughly 1% per month, in line with the Halifax and Nationwide house price indices. Mortgage approvals are also growing, the Minutes said.
The Bank of England governor Mark Carney announced the end of the Funding for Lending Scheme for mortgages earlier this month, due to improvements in credit conditions.
