Mortgages should be limited to three and a half times income.

According to UK Institute for Public Policy Research report, mortgages should be restricted by lenders to three and a half times a borrowers income and loans should be capped at a maximum of 90 per cent loan to value.

The report, which is titled forever blowing bubbles, has said that there have been four property market bubbles during the past 4 decades which have done a lot of damage to the UK economy.

The Institute for Public Policy Research has called on the government to hold steady despite strong industry lobbying and has recommended that tough changes to mortgages should be introduced to avoid a future housing bubble.

Nick Pearce who is the Institute for Public Policy Research's director commented, saying that the UK needs tough mortgage regulation to be introduced by the FSA and in particular caps should be introduced on both LTV and loan to income.

The Institute for Public Policy Research report shows that UK mortgage lending had one of the highest loan to value ratios of any of the OECD countries prior to the credit crisis, only the Netherlands offered loans at higher levels. The report said this had probably been one of the main causes as to why the credit crisis occurred.

In addition to the tightening of mortgage lending rules, the Institute for Public Policy Research called for borrowers deposit levels for buy-to-let mortgages to be increased, as this would make sure that rental incomes would cover mortgage repayments. It warned that the country's dependance on property price inflation was very bad for the UK economy.

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