Chancellor George Osborne (pictured) announced in June this year that HM Treasury wanted to grant the Bank of England’s Financial Policy Committee (FPC) these extra powers to stave off financial stability risks from the housing market before the end of this Parliament.
The levers are intended to sit alongside the FPC’s capital requirement and other macro controls at its disposal.
If the Treasury grants the FPC these powers, it will publish a final policy statement outlining how it plans to use them, including the indicators it plans to monitor regularly.
Today, the FPC also reviewed the outlook for UK markets concluding: “Markets appear to expect a gradual exit from low rates in the United Kingdom and the United States, while the ECB has cut its benchmark interest rate and announced a package of new stimulus measures.”
Later, it continued: “In the United Kingdom, economic growth has been robust and broadly based. While the housing market remains a source of risk to financial stability, activity appears to have eased slightly and the MPC’s latest projections are consistent with the rate of increase in house prices moderating earlier than previously expected. UK commercial property markets have been recovering rapidly, supported by buoyant conditions for new lending.
“The major UK banks remain on a path of gradually improving resilience, with reduced leverage and increased capital ratios and lower reliance on wholesale funding since the crisis. But uncertainty remains over potential further global conduct-related actions. The results of the 2014 stress tests will give a fuller view of the major UK banks’ capital resilience.”
The Intermediary Mortgage Lender’s Association said the move was inevitable after the Chancellor’s statement of intent in June.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), said: “Lenders must be still given some legroom to be creative and flexible in their attempts to help consumers.
“Loan-to-value ratios and debt-to-income ratios are obvious targets for the regulators, but we must sure the green shoots of recovery are given room to grow. It is also good news that the FPC is evaluating whether the parameters of the Help to Buy scheme remain appropriate as we need to ensure that the initiative isn’t artificially skewing the market.”
In an earlier story, a survey revealed brokers already think lenders have become too cautious since MMR.
