Mortgages  

CML unsure why direct powers for BoE to curb lending necessary

The Council of Mortgage Lenders has questioned the need to give the Bank of England new powers over mortgage lending.

The powers would mean the bank’s financial policy committee would be able to direct the size of a mortgage against income or the value of the house.

At the moment the bank can only recommend limits on loan-to-value and debt-to-income ratios, but the additional powers would allow it to intervene directly.

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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.

“But the market already takes extremely seriously the FPC’s powers of recommendation, so we are not sure what powers of direction add.

“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.”

But the government says the mortgage market can threaten the UK’s financial stability by undermining a bank’s capital position in the case of defaults and as the single largest liability for households.

A consultation on the new powers ended on Friday 28 November.

Adviser view

Matt Elson, a mortgage adviser at Warwickshire-based Cogent Financial Services, said: “I think it is important in the current financial climate that people can only borrow what they can afford.”