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Decision expected on housing market action Cap on mortgage lenders proposed by Bank of England
(about 3 hours later)
Central bankers will explain later whether they plan to take action to cool the housing market in parts of the UK. A cap on the proportion of home loans that can be lent at high multiples of income has been proposed.
The Bank of England's Financial Policy Committee (FPC) has new powers to tackle any threat to the stability of the UK economy. The plan was outlined by the Bank of England as governor Mark Carney said the housing market was a threat to the UK economy's stability.
Mark Carney, the Bank's governor, has said that the housing market is the biggest risk to long-term recovery. Under the proposal, lenders will not be allowed to lend any more than 15% of residential mortgages at more than 4.5 times a borrower's income.
The FPC will outline whether it plans to take action, and what that might be. Affordability checks on borrowers will also be strengthened.
Geographical differences The Bank's Financial Policy Committee (FPC) has a remit is to tackle any threat to the stability of the UK's economy.
The latest official figures about the housing market showed an annual property price increase of 18.7% in London. Some lenders, notably Lloyds Banking Group and RBS, have already limited mortgage lending to four times income for loans worth more than £500,000. The average new mortgage for a house purchase is £135,200.
This was specifically aimed at curtailing "inflationary pressures" in the London housing market.
The latest official figures on the housing market showed an annual property price increase of 18.7% in London, where a small proportion of buyers pay in cash.
Excluding London and the South East of England, the cost of a home was 6.3% higher in April than 12 months before, the Office for National Statistics (ONS) said last week.Excluding London and the South East of England, the cost of a home was 6.3% higher in April than 12 months before, the Office for National Statistics (ONS) said last week.
But various surveys have suggested that the heat might be coming out of the market with mortgage approvals - a sign of future sales - having slowed in recent months. Some areas outside of London and the South East have seen relatively little rise in activity among buyers and sellers. But various surveys have suggested that the heat might be coming out of the market, with mortgage approvals - a sign of future sales - having slowed in recent months. Some areas outside of London and the South East have seen relatively little increases in activity among buyers and sellers.
Some banks - notably Lloyds Banking Group and RBS - have introduced tighter restrictions in order to tackle "inflationary pressures in the London housing market". Lenders are already using new affordability checks - known as the Mortgage Market Review - which test people's ability to repay were interest rates to rise.
The FPC met last week, with the housing market expected to have been on the agenda but the outcome will not be made public until 10.30BST on Thursday. This will be added to, under the Bank of England's plans, as lenders will need to assess if borrowers could still afford to repay their mortgage if interest rates were three percentage points higher than at the time the loan was approved.
Possibilities Are you currently trying to buy or sell a home? Do you work in the property business? You can email us at haveyoursay@bbc.co.uk using the subject line 'housing market'.
The committee has powers that could be used to calm the housing market, and primarily affect the ability of potential buyers to get a home loan.
Should it decide to use them it could advise, but at present not impose, a cap on home loans related to income or the value of the house.
It could demand that banks hold more capital against their mortgage lending, effectively rationing the amount that is lent.
Lenders are already using new affordability checks - known as the Mortgage Market Review - which test people's ability to repay were interest rates to rise. The committee could recommend that these checks are even stricter.
Finally, the government's Help to Buy programme, aimed at helping people with an ability to make repayments but with relatively little in savings for a deposit, could be scaled back on the committee's recommendation.
Some concerns have been raised that these powers should be in the hands of elected politicians, rather than the Bank.
Are you currently trying to buy or sell a home? Do you work in the property business? You can email us at haveyoursay@bbc.co.uk using the subject line 'housing market'.