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Govt drops plans for BoE to cap LTVs

Treasury 480

The Government has dropped proposals that would allow the Bank of England to cap loan-to-value ratios for mortgages.

Last week, the House of Commons approved the Bank of England Act 1998 (Macro-prudential measures) Order 2013. It allows the Bank’s Financial Policy Committe to issue both recommendations and directions to the Prudential Regulation Authority and Financial Conduct Authority to introduce certain macro-prudential tools.

A Treasury consultation into macro-prudential tools closed in December and the Government has been at the centre of a heated debate on whether to give the FPC the power to cap LTVs.

Last week, Treasury financial secretary Greg Clark told the Commons: “It is important to note that the power to make recommendations and give directions is available to the FPC, but that there is no requirement that it should get in the business of micro-managing these sectors.”

Labour MP and Treasury select committee member George Mudie said: “Most of us were pleased when it was dropped, but it was a runner and was discussed in FSA circles for some 18 months. I am certain, from watching the industry, that it had a great effect on the industry’s decisions, as it was trying to second-guess the FSA.”

Telos Solutions director Richard Farr says: “It would have been a brutal lever to pull that could have killed the housing market.”

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