Chancellor George Osborne is set to hand new powers to the Bank of England to regulate the mortgage market by allowing it to set loan-to-value ratio limits.
The new powers would be aimed at controlling busts and booms, by banning unsustainable mortgages and preventing another housing bubble, or stimulating more lending.
The Financial Policy Committee (FPC) at the Bank will be able to set LTV limits – for example, setting them at 75% if it feared a credit bubble, or at 95% if it wanted to encourage more lending.
Osborne told MPs in a debate on the Finance Bill that the new committee, which has already been set up but does not come into legal force until next January, is to be led by the Governor of the Bank of England.
He said: “Its job is not just to try to moderate a credit boom but to try to alleviate a credit bust.”
The committee’s job will be to prevent lenders repeating the scenario of the pre-2008 credit crunch. Then it was commonplace to offer mortgages with 125% LTVs in the belief that property prices would continue rising, along with people’s ability to repay their loans.
Osborne said that the previous light-touch regulation had been an ‘unmitigated disaster’ for the economy. He said the FCP would be ‘entrusted with the stability for the whole financial system’.
Osborne said: “In many senses, this is the bread and butter of people’s daily lives, and it is very important that we understand that, as we create these instruments of policy that don’t currently exist.”
He said of the Bank’s new powers that it did not have to use them, adding: “I should say that these are just possibilities – they are potential tools that the committee might want to use.”
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Comments
FBA yup seems you have a fan and R&R has a stalker. Not sure if they are even different people though ;0)
Blimey !
I didn't realise I was getting a fan base.
Thanks guys.
Nope I dont think I have ever posted under that.
FYI the £50M additional Q.E was predicted by just about every economic and busines forum in the globe.....it was hardly crystal ball stuff from FBA.
If you have something to debate that vaguely relates to the EA industry I will be happy to coverse with you, until then toodle off and carry on with your hero worship.
Happy do you post as rantnwanknwave? As well god you boys are pretty sad! No wonder FBA makes you look like complete muppets every time you post! Keep giving the little boys it FBA its so funny these knobs hate it then it gets funnier!
I was merely asking if you were being ironic or moronic, but now i see which. No anger here i am a happy chappy!
hasnt this qunatitive thing been going on a while now? why dont they just get it done? Its not new news.
Sorry Happy posted last comment about your anger, I just found another string on another story and can see that FBA has annoyed you there, now I understand.
However try to lighten up, FBA's post are normally very funny, I appreciate its irks when he wins!
Well he did post exactlty that last night, can't see an argument was intended in a statemnet of fact, but then again it is you, bet you argue with yourself chum. So much anger, just do not understand such peolple.
Ahead of your time, are you serious?
Fun Boy Agent- Ahead of your time or in the know, BofE have done what you suggested last night, gives you a lot of credibility in your posts.
£50,000,000,000 more money printing has just been announced by the Bank of England, which is likely to result in another round of price inflation. Not that this will bother Bank of England Governor Mervyn King, whose pension is linked to rises in inflation.
Meanwhile, at the same time, Housing Minister Grant Schapps is suggesting the government hand £5,000 of taxpayers' money over to those who are currently behind with their mortgage payments.
We are, apparently, all in this together.
Ray Evans: 'Sibley's B'stard Child on 2012-02-08 11:00:02
Puzzled of Tunbridge Wells on 2012-02-08 10:09:53
Rick Deckard on 2012-02-08 09:32:26
Cheesy on 2012-02-08 09:19:18
Anonymous Coward on 2012-02-08 08:57:51
In a word?
Rubbish!.
Ray - I've been mulling over your argument since yesterday - kept me awake for a while balancing one subtle point with another - but, finally, I decided your argument is too deep for me and gave up.
Re :
Sibley's B'stard Child on 2012-02-08 11:00:02
Puzzled of Tunbridge Wells on 2012-02-08 10:09:53
Rick Deckard on 2012-02-08 09:32:26
Cheesy on 2012-02-08 09:19:18
Anonymous Coward on 2012-02-08 08:57:51
I think Ray was implying that the current economic situation was untenable as in = rubbish
That is all I could draw from it?
B of E Solution = Print more money.
But call it another, long and important, sounding name so the thicko UK public do not twig what they are really doing.
What should they call it?
What do the yanks call it?
Call it that!
"Quantitative easing"
That'l do, the dopey public will never grasp that.
Cheers George
This sounds like quite sensible as a guidline to me.
Free markets like altruism simply dont exist
This is an interesting thread but obviously none of you have been lenders and sadly none of you have read my previous posts relating to this subject from nearly 25 years of lending money for NBS.
In brief:-
The idea of 2 years P60's and tax forms etc etc is not way off beam. That used to be done, though admittedly not for two years as most people don't keep records that long even of key papers that they should.
x3 single income or x3.25 joint worked well for donkeys years - all depends n the 'stability' and nature of the job, plus how much is basic, overtime, bonus(!!! - no bankers please!!) etc.
Deposit - 10% is OK, again dependant on income types and risk analysis. Riskier the loan higher the deposit, lower the lending multiples. All so simple and easy makes you wonder how it all ever went wrong, doesn't it?
@ Barry Chuckle
I've been waiting for this one. I was working for NBS when they suddenly decided, around 1990 from memory, that endowment policies no longer needed to be assigned to the lender i.e. first call at maturity to pay off the loan.
I was staggered then and am even more staggered now at how interest only loans [admittedly without endowment policies which have matured for 10 years now at pitiful levels compared to original targets (more mis-selling)] have come to dominate the market. OK they cost less per month - but at what end cost when it comes to having to pay them off. Again this was going to be from continually rising prices, but there must be a lot of 60+ borrowers out there wondering how the hell they are ever going to pay their loan off at 75 - the age cap imposed by most lenders for term + age = end of mortgage.
@AC
The American gun laws are 95% of their crime problem. The problem is the average Yank regards himself as some sort of frontiersman stock which is where the right to bear arms came from - when you needed to in order to defend your ranch against injuns and grizzly bears.
It is a totally outdated concept - the right to bear arms should only have existed as long as it needed to and until there was an organised crime prevention force etc.
Well Ray, there's a turn up for the books, we both agree on something - the government shouldn't interfere or manipulate the housing market (ostensibly to buy votes and because a fair number of MPs are into property, Chris Huhne being a prime example).
Here's to a free market, and the attendant price correction.
BTW
3 is an arbitrary figure that I used from personal experience when I bought my first house in 1995.
Any sensible figure could be placed her 2, 3, 4...
As long as it is sensible for Mr & Mrs Average.
And yes of course averages don't work countrywide, but it is certainly a good place to start.
Hi Ray
Hugs & Kisses ;-D
Actually, I am 100% against regulation, but I was driving home the other night and the questions of US gun laws came on the radio.
Bear with me on this.
Americans LOVE guns and the right to bear arms is part of their constitution.
BUT if guns are illegal and the law is strictly enforced (like here in dear old Blighty) then the chances of me meeting a man with a gun who wants to hurt me are seriously limited.
MY GAWD says the American, I demand the right to defend myself... All of a sudden there is no need to have a gun under your pillow.
Same applies with mortgages funnily enough.
If EVERYONE is restricted in the same way with how much money they are allowed to borrow, then all of a sudden Liar Loans vanish, massive (fake) price surges disappear and we all move ahead smoothly.
I put it a bit simply in the first post because I felt like it but imagine the following:
Either:
1. A forensic investigation of your finances and a mortgage offer based on your averaged outgoings over the last 24 months (wow - the paperwork).
2. Average of your last 2 years' salary (based on the amount of tax you paid/ P60s) multiplied by a sensible figure - say 3.
Both work, we could have them in tandem if you like, but one should come with a high admin cost, the other low.
You could also allow some kind of wiggle factor in the multiple (say up to 3.5 times) if the customer has an exemplary credit score.
Nice, simple, easy to apply, sensible, practical lending for the masses.
For me option2 would be a problem as I am very tax efficient and if I wanted to apply for a mortgage on that basis I would maybe have enough for a couple of garages....
But, I could go down route 2....
I have advised builders for so many years on buying land build costs and sale prices and all based on today’s figures. If prices dropped a bit they could still get out without going bust. Then along came the bankers (did I spell that right) and they lent up to 125% in the vain hope that all would be well day after tomorrow. Here we are up the creek in a barbwire canoe without a paddle.
The Bank of England should not meddle in matters they are not familiar with but leave decision making on lending levels to those lending. They will not make the same mistake again.
If lending is restricted by the Bank of England all that will happen is the market will slow down even more as the lenders will have an easy target and blame them for their shortfall in funds.
Oh dear it does not get any easier and it is all created by greed and no heads have rolled as yet but some bonus money has been rejected - big deal.
@Sibley's B'stard Child on 2012-02-08 12:01:12
Hi!
There is no argument. "Control Freaks" - especially government ones - destroy free markets.
However, everyone is entitled to their own opinions - even if only for the time being until they get around to that as well!? ;0)
In other news I see that Santander are only gonna offer interest only mortgages to those with 50% equity/deposit and only then with stricter rules on what constitutes an acceptable repayment vehicle. For both new borrowers and existiing borrowers moving house (I guess not moving now). Could set a sensible precedent.
Limit their bonus payments, better plan.
Y'know what Ray, that's what I love about this place; the intellectual cut-and-thrust that really gets the grey matter going.
You've got me there fella; a more coherent and well-structured counter-argument there never was.
Sibley's B'stard Child on 2012-02-08 11:00:02
Puzzled of Tunbridge Wells on 2012-02-08 10:09:53
Rick Deckard on 2012-02-08 09:32:26
Cheesy on 2012-02-08 09:19:18
Anonymous Coward on 2012-02-08 08:57:51
In a word?
Rubbish!.
P.S. I can take the heat. ;>)
Anonymous Coward, hallelujah!
The only thing that allowed house prices to get out of control has been the relaxing of credit issuance. If this diktat was put into place house prices would eventually fall to a level that actuall bears some semblance to peoples' ability to EARN and not to BORROW.
TM PeeBee :p
By the way Property Hawk, the housing market is already 'benefiting' from massive state intervention at the expense of the younger generation in a vain attempt to stave off the inevitable (read: ZIRP, SMI, successive governments 'Homebuy' schemes, next-to-no new housing built).
Adrian Simmonds: 'If this is allowed it will be the start of the end for a free market and private property ownership in the UK. They will eventually want the power to decide who can have a mortgage and who can not.'
But, if mortgages were heavily restricted, house prices would be a fraction of what they are now. The whole edifice is built on unsustainable levels of debt.
Property Hawk: ' ...but when it comes to the UK housing market to which so much and so many are affected by….leave it alone…..it (the housing market) will find its own level, lenders will have learnt their lessons on lending ...'
What lenders have learnt is that if they make bad lending decisions - lend the same money to each other and to borrowers over and over again by way of Mortgage Backed Securities and Collateralized Debt Obligations etc. - inflating house prices way above any sensible relationship with affordability - WE, THE TAXPAYERS OF THIS COUNTRY, WILL BAIL THEM OUT.
They have learnt they are TOO BIG TO FAIL.
If the housing market were allowed to find its own level, most of our lending institutions would be technically bankrupt.
This is more power to the Banksters , who created the crisis the their fraudulant Martgage Backed derivitives and the Big Brother govmt. Remember Osborne works fro the Rothchilds, who control the Bank of England.
More regulation is not what is needed, what we need is a new building society style movement to provide honest mortgages. The big bankers should be in prison for creating and using Weapons of financial mass destruction and Economic terrorism.
If this is allowed it will be the start of the end for a free market and private property ownership in the UK. They will eventually want the power to decide who can have a mortgage and who can not
The Government need to rethink this plan, if it’s true. State intervention and trying to regulate banking like this is not the way. If our government thinks that the Financial Policy Committee (FPC) will have a crystal ball and be able to adjust LTV to enable a smooth, low risk and stable market place will be sadly wrong, if this goes ahead all it will do is create more uncertainly within the housing market….
PM Cameron, I support totally the need to cut our cloth as a country and live within our fiscal means, but when it comes to the UK housing market to which so much and so many are affected by….leave it alone…..it (the housing market) will find its own level, lenders will have learnt their lessons on lending and you have the Bank of England MPC to make decisions on interests rates.
1. 3 x Single Salary
2. 2.5 x Joint Salary
10% minimum deposit - Sounds like a worthy plan
+ restricting foreign ownership of one residential place of residence held in the UK would be good as well.
About time too. I reckon 20% deposit would be sensible.
There is a grey man in a grey suit standing behind you but you can't see him. He is holding a shi77y stick, ready to beat you. You are being watched.
I would suggest either:
1. 3 x Single Salary
2. 2.5 x Joint Salary
10% minimum deposit.
Just call me Prudence!