BBA response to Financial Policy Committee recommendations
Commenting on the recommendations of the Bank of England’s Financial Policy Committee, BBA chief economist Richard Woolhouse said: “This is a cautious and clever intervention by the Bank in its first major foray into macro prudential policy. The lending cap will have little impact on the market in the short-term, but sets an important backstop to ensure indebtedness does not get out of control and pose a risk to the broader economy moving forward.
“The policy also addresses the specific risks of the London market without having a disproportionate effect on the rest of the country – lending at over four and a half times loan to income is currently at 9% nationally, but is close to 20% in London.
“In terms of the new affordability tests, some lenders were already conducting such stress tests in line with expected rises in interest rates. So this is just instituting good practice across the market.
“Overall this is a proportionate step by the FPC that focuses on personal indebtedness rather than house prices.”
