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Bank of England could cap mortgages

 

In an effort to prevent a housing bubble, Mark Carney, Governor of the Bank of England (BoE) has suggested preventative measures for mortgage lending.

 

Capping mortgage to salary ratios is one way in which the BoE thinks a crisis can be averted. What Mr Carney referred to as an ‘affordability test’ for borrowers, and putting control measures on the Government’s Help to Buy scheme, may be included in the plans.

 

Mr Carney said: ‘We could do more, we could take steps around affordability to test whether or not individuals can test mortgages at much higher interest rates.

 

‘We could limit amounts of certain types of mortgages that banks could undertake, we could provide advice – the Chancellor has asked us if we would provide advice on changing the terms of Help to Buy – all those things are possibilities and we will consider them all’.

 

Mortgages of more than four and a half times a person’s salary could be the new limit if the plans go ahead. All of these measures are being suggested because, as Mr Carney claims, the housing market potentially represents the ‘biggest risk’ to the UK’s economic recovery.