In its meeting on 19 March the committee discussed the appropriate scenario for a UK-specific bank stress test which would include the pressure of risks arising from the housing sector.
The framework and scenarios for the test, which will include the risks of interest rate rises and wider economic threats, will be published by the end of April.
While details of the “housing market shock” scenario have not been made public the Bank outlined a number of risks it saw arising from a recovering housing market in its November Financial Stability Report.
It highlighted that as property prices rose lenders were increasing their loan-to-values and offering higher loan-to-income ratios.
And it noted borrowers were stretching mortgage terms over a longer period to reduce monthly payments against a backdrop of already low interest rates.
In its report the FPC said that household finances were “highly sensitive” to fluctuations in property prices.
The FPC’s model, which will be agreed with the Prudential Regulation Authority, will run alongside the EU-wide stress test which is being developed by the European Banking Authority.
