He didn’t say which tools he would use but in October last year, the government amended the rules for loan-to-income ratios (LTIs) by constraining new lending at or above 4.5 to no more than 15% of an institution’s new mortgage loans.
A Mortgage Solutions poll out yesterday revealed many brokers are finding deals easier to place and think lenders have relaxed lending criteria to hit year-end lending targets.
The Bank also has the power to raise capital requirements for bank lending, increase the risk weights for specific assets or put limits on particular types of lending.
Carney said in September that it was concerned about buy-to-let mortgage lending. His comments yesterday suggested that the concern is now wider than just this market.
The bank’s Financial Policy Committee next meets later this month, revealing any action it might take to limit credit growth on 1 December.
Encouraging domestic spending had potentially serious consequences, Carney warned, citing “unsecured credit growth at 8% for consumers, house price growth picking up, activity in the housing market picking up and a further fall in the savings rate to historically low levels”.
“We are conscious of those developments,” he said, adding that the BoE would need to think about using levers to curb credit growth — known as macroprudential tools.
“That does bring into scope some macroprudential considerations,” the governor said.
The BoE’s quarterly economic forecasts also out yesterday showed inflation was likely to remain below 1% for most of 2016, the bank said, before gradually returning to its 2% target and ending 2018 marginally above that level.
But to keep growth and inflation broadly on track, the central bank had to base its forecasts on interest rates remaining at rock bottom rates of 0.5% until the spring of 2017, a year later than it assumed in August.
Yesterday, the Monetary Policy Committee minutes confirmed it had voted 8 to 1 in October to hold the Bank Base Rate at 0.5%.
MPC member Ian McCafferty voted for the third consecutive month to increase the bank rate by 25 basis points. The committee also voted unanimously to maintain the Bank’s stock of purchased assets at £375m.
