Chancellor of the Exchequer George Osborne MP
Banks and mutual lenders could be barred from offering high loan to value mortgages available to borrowers to prevent another credit crisis, George Osborne said on Monday night (6th February).
The Chancellor of the Exchequer said the Financial Services Bill would give the Bank of England’s Financial Policy Committee powers to “alter the maximum loan to value ratios in mortgage lending to curb a sharp, unsustainable rise in house prices.”
The new FPC, chaired by the governor of the Bank of England, would also be able to force banks to hold more capital to stop credit bubbles growing out of control, as part of reforms the chancellor said would “affect the bread and butter of people’s daily lives”.
He told MPs in the Commons: “This FPC should act symmetrically...Its job is not just to try to moderate a credit boom but to try to alleviate a credit bust.
“The precise tools we give to the FPC are yet to be determined. I freely accept that we are largely in un-chartered territory in policy making here or indeed anywhere in the world.
“But surely the experiment of making no attempt to moderate the credit cycle, let the bubbles grow and burst and then clean up afterwards, has been an unmitigated disaster and I think we would be failing if we didn’t look for an alternative approach.”
Christina Gough, Mortgage Adviser at the Mortgage & Insurance Bureau said: “Lenders have already tightened their criteria in terms of multiples of income and loan to value ratios. These comments simply reinforce what is already in place and signal that the Government is not willing to allow any significant change that may fuel house prices or raise credit issues again.”
