As IMLA and others have argued, heavy-handed intervention in the mortgage market is not what’s needed when mortgage growth is visibly detached from the housing market, where Nationwide, Halifax and ONS indices all show prices rising by more than 7% in the last year.
Though gross mortgage lending in Q1 2014 was also noticeably higher year-on-year, this pre-MMR rise came in the context of the low base we are working from, shrinking mortgage debt in real terms and a market where homeowners are putting over £10bn of equity into their properties each month.
It was clear from the press conference that the governor was setting up mechanisms to limit any expansionary tendencies in the market and which might increase borrower and market vulnerabilities.
Rationing the percentage of high loan-to-income mortgages and imposing a firm stress test requirement will certainly impact future opportunities for some creditworthy consumers to buy or remortgage.
Broadly speaking, the Financial Policy Committee (FPC) recommendations provide room for balanced growth of mortgage lending. In the case of affordability tests, the majority of lenders are already practicing what the FPC has preached.
However, this is not a one off. It is clear the Bank of England may do more depending on how the market develops.
This puts a considerable pressure on lenders and intermediaries who will have the difficult job of supporting consumer demand while at the same time staying well within the guidelines which are now in place.
Peter Williams is executive director of IMLA
