Mortgage restrictions - BoE called on to control lending.

The BoE are once again under pressure to accept the power to restrict mortgage lending.

An inquiry is to be opened by the Commons Treasury Committee into what tools should be at the BoE's disposal to maintain economic stability in Britain. Particular attention will be made to why the BoE continues to refuse powers to restrict riskier mortgage lending.

The IMF have now entered the debate, saying that the BoE should accept proposed powers to ban certain mortgage products by placing a limit on LTVs and loan to income ratios, as this could restrain any future property bubbles.

The BoE point out that this policy could be extremely controversial as it would give unelected central bankers the power to prevent would-be home-owners, and in particular first time property buyers from being approved for a mortgage.

The bank believe that only elected politicians should be given the power to make such decisions. The chancellor George Osborne has yet to decide what tools the new Financial Policy Committee are to be given.

The interim FPC commented saying that the power over LTVs and restriction of loan to income ratios could be highly beneficial to UK financial stability. However it added that it has not asked for the power to restrict mortgages as this would require a high level of acceptability.

The Treasury Select Committee now call on the BoE to justify their decision not accept the power to control mortgage lending.

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