George Osborne plans to limit mortgage loan-to-value.
Discussions over potential caps to LTV levels on mortgage deals has been firmly put back on the agenda by George Osborne, who told ministers that the BOE should be allowed intervene in order to prevent a future housing crisis from happening.
Osborne was speaking in the Commons when he said that the government's new Financial Services Bill could give the BOE committee the power to amend the maximum LTV mortgage ratios in UK lending, in an effort to curb unrealistic and unsustainable property price increases.
His plan also includes empowering the newly appointed Financial Policy Committee to force mortgage lenders into holding more capital to prevent a further credit bubble. He added that the Financial Policy Committee must act in symmetry as its job is to try not just to moderate a credit boom but, also to attempt to alleviate any credit bust. He continued by adding that he freely accepts that the government is entering into uncharted territory in terms of policy making however, he said that the previous government's experiment, by not making any attempt to moderate the credit cycle had been a complete disaster.
The committee is to assume the responsibility of monitoring the risk across the system, and is to be chaired by the governor of the Bank of England.
Osborne had revealed his new mortgage proposals during a reading of the Financial Service Bill. The new Financial Policy Committee is to report in March this year as to the exact nature of its powers.
