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Cable makes plea to curb property price rises

Liberal Democrat trade and industry spokesman Vince Cable is urging the Government to give the FSA powers to curb unsustainable price inflation in the housing market to avoid a crash.

Cable is calling on the Treasury to implement prudential regulation of lenders through the FSA to balance borrowing and affordability, including imposing maximum loan to value ratios to reflect the current level of overheating.

He is warning that without such Government intervention there will be a repeat of the “boom and bust” cycle of the late 1980s and early 1990s.

But the FSA dismisses this suggestion, saying it is not in a position to interfere with market forces and the commercial decisions made by lenders.

Cable also wants an independent “asset value committee” set up along the lines of the monetary policy committee. It would focus on the housing market with the power to make judgements on sensible LTV limits.

He says the committee would be made up of independent experts and not mortgage lenders with “vested interests” in playing down the possibility of the market crashing.

Cable says: “Prudential regulation is a means of preventing the market getting seriously out of balance.”

FSA spokesman David Cliffe says: “There are proposals in CP146 on how lenders and advisers will assess affordability and suitability. The amounts that firms will lend is a commercial decision for them and not within our remit.”

The Treasury says it is considering a reply to Cable&#39s correspondence.

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