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BoE threatens mortgage lending curbs

Bank is seeking to head off a future housing bubble.

The Bank of England is threatening to impose tough new curbs on mortgage lending as it seeks to head off a future housing bubble.

The financial policy committee’s quarterly financial stability report, published last week, says there is no “immediate threat” to financial stability from the housing market but issues a series of warnings about the quality of mortgage lending and funding.

The report says there is evidence that underwriting standards are beginning to slip.

It says the Bank could tackle a house price bubble with tougher capital rules in targeted areas alongside loan-to-value and loan-to-income caps.

The FPC also says it will “closely monitor” house prices.

Separately, Bank governor Mark Carney has responded to questions raised by Treasury select committee chair Andrew Tyrie over the Bank’s role in controlling Help to Buy.

In a letter to Tyrie, Bank governor Mark Carney said the Bank does not have a veto on the second part of the scheme.

The second phase of Help to Buy, launched in October, has provoked fierce criticism from economists over fears it could spark a house price bubble.

Carney said the FPC will have no powers to vary the terms of, or close, the scheme and can only make recommendations.

London & Country director David Hollingworth says: “The Bank is sending out a clear message that it is keeping a close eye on the market.

“Although it does not have a veto on Help to Buy, I am sure if the Bank made strong recommendations to rein in the scheme, it would not be ignored.”

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