This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.theguardian.com/business/2013/nov/28/bank-england-fls-mortgages-house-prices
The article has changed 7 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| Bank of England refocuses mortgage lending scheme to avoid housing bubble | Bank of England refocuses mortgage lending scheme to avoid housing bubble |
| (35 minutes later) | |
| The Bank of England has taken the first steps to ensure a housing bubble does not emerge by scaling back the Funding for Lending Scheme (FLS) to focus on business loans instead of mortgages. | The Bank of England has taken the first steps to ensure a housing bubble does not emerge by scaling back the Funding for Lending Scheme (FLS) to focus on business loans instead of mortgages. |
| While stressing that the housing market is not an immediate risk to financial stability, Threadneedle Street is forcing banks to hold more capital against mortgage lending through existing guarantee schemes. | While stressing that the housing market is not an immediate risk to financial stability, Threadneedle Street is forcing banks to hold more capital against mortgage lending through existing guarantee schemes. |
| Explaining the decision to remove mortgages from the FLS scheme next year, the Bank of England governor, Mark Carney, said it was "no longer appropriate to have our foot on the accelerator, better to shift it to neutral". | Explaining the decision to remove mortgages from the FLS scheme next year, the Bank of England governor, Mark Carney, said it was "no longer appropriate to have our foot on the accelerator, better to shift it to neutral". |
| In other changes, the annual health check of Britain's banking sector being introduced next year will also require banks to look at their resilience to housing shocks. And the Bank's Financial Policy Committee (FPC) – set up to look for the next bubbles in the financial system – is also requiring the Financial Conduct Authority to force banks to embark on tougher tests when deciding if a customer can afford a mortgage. | In other changes, the annual health check of Britain's banking sector being introduced next year will also require banks to look at their resilience to housing shocks. And the Bank's Financial Policy Committee (FPC) – set up to look for the next bubbles in the financial system – is also requiring the Financial Conduct Authority to force banks to embark on tougher tests when deciding if a customer can afford a mortgage. |
| In a letter to George Osborne, Carney set out the changes to the FLS which has led to a fall in bank funding costs since it was introduced in July 2012. | In a letter to George Osborne, Carney set out the changes to the FLS which has led to a fall in bank funding costs since it was introduced in July 2012. |
| Carney said that the FLS would try to focus more on lending to the business sector, and a relaxation in capital rules that had been applied to mortgage lending would be removed. | Carney said that the FLS would try to focus more on lending to the business sector, and a relaxation in capital rules that had been applied to mortgage lending would be removed. |
| "Although the growth in household loan volumes remains modest, activity is picking up and house price momentum appears to be gaining momentum," Carney told the chancellor. | "Although the growth in household loan volumes remains modest, activity is picking up and house price momentum appears to be gaining momentum," Carney told the chancellor. |
| However, there are no changes to the Help to Buy scheme which the Bank will assess annually from 2014 – and in its half-yearly check on the risks to financial stability the Bank said there was not a risk to the financial system from the housing market. | However, there are no changes to the Help to Buy scheme which the Bank will assess annually from 2014 – and in its half-yearly check on the risks to financial stability the Bank said there was not a risk to the financial system from the housing market. |
| "UK housing market activity is picking up from low level and inflation in house prices – which is already above historical averages on some metrics – appears to be gaining momentum. At present activity remains below long-term trends and underwriting standards are materially higher than before crisis. There is little evidence of an immediate threat to stability," the bank said its half-yearly Financial Stability Report (FSR). | "UK housing market activity is picking up from low level and inflation in house prices – which is already above historical averages on some metrics – appears to be gaining momentum. At present activity remains below long-term trends and underwriting standards are materially higher than before crisis. There is little evidence of an immediate threat to stability," the bank said its half-yearly Financial Stability Report (FSR). |
| But the FSR said risks could come from further rises in house prices and a build-up in household indebtedness which would be accentuated if underwriting standards on mortgage lending were to be relaxed so it was putting "several actions in train that will guard against a build-up in vulnerabilities". | But the FSR said risks could come from further rises in house prices and a build-up in household indebtedness which would be accentuated if underwriting standards on mortgage lending were to be relaxed so it was putting "several actions in train that will guard against a build-up in vulnerabilities". |
| As well as removing the lower capital rules for banks lending for mortgages via the FLS, the FCA will ask banks to test customers' vulnerability, not just to the scenario of a 3% base rate in five years' time, but also a lengthening in mortgage terms, for instance. These affordability tests will be introduced from April 2014. | |
| "The FCA should require mortgage lenders to have regard to any future FPC recommendation on appropriate interest rate stress tests to use in the assessment of affordability," the FPC said. | "The FCA should require mortgage lenders to have regard to any future FPC recommendation on appropriate interest rate stress tests to use in the assessment of affordability," the FPC said. |
| The Bank said a key risk to financial stability could be caused by an abrupt rise in long-term interest rates and the FCA is working with banks and other firms to ensure they are prepared for this risk. Public sector indebtedness has also risen since the crisis and some households remain vulnerable. "Financial stability risks remain including from the high indebtedness of some sovereigns, corporates and households. These vulnerabilities have been kept in check by low interest rates and other policy interventions," the FSR said. | The Bank said a key risk to financial stability could be caused by an abrupt rise in long-term interest rates and the FCA is working with banks and other firms to ensure they are prepared for this risk. Public sector indebtedness has also risen since the crisis and some households remain vulnerable. "Financial stability risks remain including from the high indebtedness of some sovereigns, corporates and households. These vulnerabilities have been kept in check by low interest rates and other policy interventions," the FSR said. |
| Households with loans five times greater than their incomes account for a fifth of total UK mortgage debt. | Households with loans five times greater than their incomes account for a fifth of total UK mortgage debt. |
| The FSR spelt out other actions it could take in the future to mitigate risks from the housing market such as making further changes to capital rules. | The FSR spelt out other actions it could take in the future to mitigate risks from the housing market such as making further changes to capital rules. |
| It also set out more detail about how it might set the so-called leverage ratio. | It also set out more detail about how it might set the so-called leverage ratio. |
| Our editors' picks for the day's top news and commentary delivered to your inbox each morning. | Our editors' picks for the day's top news and commentary delivered to your inbox each morning. |