26 Jun 2014
BoE unveils plans for curbing UK housing bubble
FXStreet (Łódź) - Following the release of the UK Financial Stability Report on Thursday, in which plans for putting a cap on some mortgages and toughening lending conditions had been announced, BoE governor Mark Carney said at a press conference that it's an early move to prevent risks from the housing market in the UK.
The new rules include forcing banks to limit mortgages with a loan-to-income ratio of 4.5 or more to 15% of overall loan books. Moreover, affordability tests for new UK home loans will be more strict, with the borrowers obliged to prove their ability to repay the mortgage even if interest rates grew by 3%.
Mark Carney assured that the new measures were aimed at "turning recovery into a durable expansion" in the UK where currently the housing market poses the biggest risk. He added that the proposals would have no impact on current housing activity, but would "bite" if a sustained rise in house prices occurred.
The regulation is aimed at spurring responsible lending and preventing reckless lending in the future. As soon as it comes into force, households will be able to get mortgages only if they can afford them, Carney said.
The new rules include forcing banks to limit mortgages with a loan-to-income ratio of 4.5 or more to 15% of overall loan books. Moreover, affordability tests for new UK home loans will be more strict, with the borrowers obliged to prove their ability to repay the mortgage even if interest rates grew by 3%.
Mark Carney assured that the new measures were aimed at "turning recovery into a durable expansion" in the UK where currently the housing market poses the biggest risk. He added that the proposals would have no impact on current housing activity, but would "bite" if a sustained rise in house prices occurred.
The regulation is aimed at spurring responsible lending and preventing reckless lending in the future. As soon as it comes into force, households will be able to get mortgages only if they can afford them, Carney said.