Bank prepared to burst potential housing bubble

Robyn Hall

September 12, 2013

Speaking at a Treasury Select Committee Carney said that increasing CAR requirements for lenders was just one of a “considerable range of policy options” at the central banks disposal.

He added that dealing with a house price bubble would be the job of the Bank’s new Financial Policy Committee.

The BoE governor said the FPC would initially try to prevent any potential housing bubble through tighter supervision of bank lending but warned that it would increase CAR to reduce the amount that lenders could lend if needed.

But the governor stressed that there was little sign of a boom yet with “big pockets of the country where there has not been any meaningful recovery”.

Carney’s comments to the Select Committee come at a time of mounting concern that the Help-to-Buy scheme could ignite a potential property boom.

In recent weeks industry figures have been joined by high profile politicians, most recently business secretary Vince Cable, in questioning the suitability of the scheme.

The BoE governor also said that he would be monitoring the high loan to value market and would like an open debate to be had to consider introducing LTV caps.

Carney said: “I think it should be a question of open debate for whether there should be a consideration, if there were a case where there were vulnerabilities in the judgment of the financial policy committee, whether there should be some guidance provided in terms of LTV ratios and loan-to-income ratios.”

But he added that the BoE does not have the power to order lenders not to offer mortgages above a certain percentage of the value of a property.

At present the BoE only has the ability to recommend a change to LTV ratios to lenders and as such any decision to cap LTVs would have to be made by Parliament.

Sign up to our daily email