In the minutes of its September meeting on financial stability, the FPC said UK house price growth had reached levels not seen since before the global financial crisis in 2007.
The committee said house price inflation was a result of temporary policy support and “factors that could prove more persistent”.
But unlike the lead up to the financial crisis, when rapid house price growth was linked with riskier lending practices, the committee said “there is little evidence so far of a deterioration in lending standards or a material increase in the number of highly indebted households”.
The FPC has recommendations in place to uphold mortgage underwriting standards including stress testing mortgage borrowers’ affordability at three per cent above the standard variable rate, unless a five-year fixed rate is being taken.
The committee said it was due to finalise its review of its mortgage market recommendations in December.
Business insolvencies expected to rise
Rising levels of debt has been concentrated in specific sectors and business types, particularly small and medium-sized enterprises (SMEs), that had not previously borrowed money before or would have met lenders’ criteria for a loan. This increase in debt, said the FPC, is likely to have led to a rise in vulnerable businesses.
The committee warned that as the economy recovered and government support, including restrictions on winding up orders, were removed business insolvencies were expected to increase from historically low levels.