The Bank of England’s Financial Policy Committee has recommended that no changes are needed to the Help to Buy: mortgage guarantee scheme, saying it is working as intended, and not causing market distortions or any threat to financial stability.
The Council of Mortgage Lenders (CML) welcomed the news. It said it also notes with interest the FPC’s recommendation that the Treasury should give it directive powers to place limits on both owner-occupier and buy-to-let mortgage lending by reference to loan-to-value ratios and loan-to-income ratios, including interest coverage ratios in respect of buy-to-let lending.
The CML says there is a distinction between getting a power and deciding when to use it, and does not believe that the recommendation implies a perception that such a new power, if granted, would necessarily be used in the near future. The CML believes that an informed debate on the new powers will be needed to ensure that there would be no unintended consequences, and looks forward to working constructively with the authorities on these issues.
The lender trade association also welcomed the FPC’s view that its previous recommendation on interest rate stress testing is now implemented, through FCA rules and supervision.
CML director general Paul Smee said: “On Help to Buy, we completely share the FPC’s view that it has not changed risks in the housing market. It is reaching its intended target, but not stoking disproportionate levels of activity in low-deposit lending nor acting as any significant influence on house prices.
“On the suggested new powers, it is interesting that the FPC explains that there are two reasons why a Directive power may be useful; firstly for speed, but secondly – and this is important – for clarity.
“The FPC’s explanation that it would need to provide a policy framework to set out what would trigger the use of the power would help all involved in the housing market to appreciate what core indicators the authorities would use to judge whether financial stability risks were building up and to respond appropriately. We will enter the debate in this spirit and we are not anticipating that the granting of these directive powers would mean they would immediately be used.
