The new controls mean the FPC will have greater direction over the housing market, instead of its current stance which only allows it to recommend on policies.
Confirming the changes, City minister Andrea Leadsom said the FPC would be given new tools to ensure it had the powers it needed to safeguard the stability of the UK’s financial system.
The government has also announced a leverage ratio framework for UK banks in an effort to guard against any future risks to financial stability.
“Building a stronger and safer financial system is a key part of our long-term economic plan. That’s why we put the independent Bank of England back at the centre of ensuring emerging risks to financial stability are identified, monitored and effectively addressed. And it’s why we’ve been clear that the Bank should have the tools it needs to do this important work,” Leadsom said.
“Today we’re confirming that the government will grant the Bank additional powers to guard against future risks. By acting now, we’re helping to protect families and businesses up and down the country from any financial shocks in years to come.”
In October, following the Chancellor’s 2014 Mansion House speech, the FPC urged the government to hand it powers of direction over housing market tools.
The Council of Mortgage Lenders questioned the FPC’s intentions to control LTV and DTI caps, explaining that current owner-occupier regulations in place were sufficiently robust.
The government said it intends to consult separately early in the new parliament on the FPC’s recommendations for it to be handed new powers over the buy-to-let market.
