The Financial Conduct Authority board has voted to include the Financial Policy Committee's interest rate stress test recommendations in its handbook.
The instrument, which comes into force immediately, gives the FPC the power to recommend adjustments in lenders’ interest rate stress tests if it feels market expectations are understated and pose a threat to financial stability.
The amendment states: “In coming to a view as to likely future interest rates a mortgage lender must have regard to market expectations and any prevailing FPC recommendation on appropriate interest-rate stress tests.”
Bank of England governor Mark Carney first announced his intentions to monitor mortgage lenders’ actions more stringently in September last year.
He said he wanted to make sure than underwriting standards were maintained to make sure there would not be a return to reckless lending attitudes.
