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FPC handed power to cap LTVs

The Financial Policy Committee has been given the powers to cap loan-to-value and debt-to-income levels.

The Treasury this week confirmed the move following a consultation, which was launched in November.

In October, the FPC was given the power to control loan-to-income ratios, stipulating lenders must limit the volume of loans at or above 4.5 times income to 15 per cent of all new lending.

The majority of respondents to the Treasury consultation said they were aware of the benefits of the FPC being granted additional controls over the housing market, though the paper notes that these were deemed to be “blunt tools” by the industry.

While the new powers are designed to cover the owner-occupied mortgage market, the Treasury will consult separately this year on whether the FPC should be granted equivalent powers over the buy-to-let market.

Chancellor George Osborne says: “The Bank of England will have further powers to safeguard the stability of Britain’s financial system from any future risks posed by our housing market or banks.

“It’s part of a formidable agenda for economic policy over the years ahead, a long-term economic plan for Britain that delivers for hardworking people.”

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