The FPC published recommendations to the Treasury requesting that it be given a power of direction – as opposed to a power of recommendation in respect of LTV and DTI caps.
An LTV refers to a loan applicants income in relation to the amount they wish to borrow, while a DTI also takes into account any unsecured loans the applicant has.
In response to the Treasury’s consultation on the issue the CML said it believes that if the FPC does gain directional powers it needs to put in place a parallel robust system of consultation on their use.
The CML also feels that owner-occupier regulations already in place are sufficiently robust and that it is incumbent on the FPC to articulate the regulatory gaps it feels it needs to fill.
The trade body also said that lending to high-net worth individuals should be excluded from any limits on debt-to-income and warned that caution is needed when applying any new rules on the buy-to-let lending market
Paul Smee, CML director general, said: “Given the importance of the £1.3trn mortgage market, we recognise that it will inevitably be the sector that potentially bears the brunt of the impact of macro-prudential tools.”
He said that the CML understood the need to hardwire in a clear understanding of how the tools would work in future, although he felt it was clear that no further intervention was needed under current market conditions. He said that the market already took the FPC’s powers of recommendation very seriously.
“If the Treasury does decide to give the FPC these special powers, we think it is crucial that these should be accompanied by an ongoing commitment to proper consultation and communication with those who would be affected by them.”
