Britain’s Chancellor of the Exchequer George Osborne is planning to confer special powers to Bank of England (BoE) to control mortgage lending and trim the risks that may threaten financial stability.
According to an estimate, housing prices in the UK have surged by 11% over the past year and are near to pre-crisis levels.
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British finance minister George Osborne further said that the housing market is currently not posing an immediate threat to Britain’s financial stability; however, it might cause trouble in future.
Osborne said, "I want to make sure the Bank of England has all the weapons it needs to guard against risks in the housing market."
"I want to protect those who own homes, protect those who aspire to own a home, and protect the millions who suffer when boom turns to bust."
Sensing the looming trouble, the International Monetary Fund (IMF) and the European Commission (EU) has also requested the UK government last week, to initiate necessary measure to cool the housing market and decrease the risk of a disability.
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By GlobalDataAccording to the plan being churned out, the authorities are expected to cap the size of mortgages as a proportion of income or property value. It is believed that the new power will enable BoE Governor Mark Carney to control the booming mortgage market in the country.
If the Financial Policy Committee (FPC) offices found that some borrowers are being provided with "excessive" home loans, they can cap the proportion of high loan-to-income mortgages each bank can lend. Furthermore, they can also prohibit new lending above a specific multiple.
The BoE’s new powers will boost the ability of FPC to control pressures in the housing market without increasing interest rates.
