In his June 2014 Mansion House speech the Chancellor committed to ensuring that the Financial Policy Committee (FPC) has “all the weapons it needs to guard against risks in the housing market. He announced his intention to give the FPC “new powers over mortgages, including over the size of mortgage loans as a share of family incomes or the value of the house.”
Following the Chancellor’s announcement the FCS recommended that it be granted powers of direction relating to housing market tools in relation to owner-occupied mortgages and buy-to-let residential mortgages. In particular the FCA recommended that it be granted the power to direct, if necessary to protect and enhance financial stability, the PRA and/or FCA to require regulated lenders to place limits on residential mortgage lending, both owner-occupied and buy-to-let, by reference to: (i) loan-to-value (LTV) ratios; and (ii) debt-to-income (DTI) ratios, including interest coverage ratios in respect of buy-to-let lending.
In response to this recommendation, the Government consulted on and legislated for powers of direction relating to LTV limits and DTI limits in respect of owner-occupied mortgages. The FPC has subsequently published a policy statement setting out how it intends to use its tools in the owner-occupied mortgage market.
For buy-to-let mortgages the Government stated that its intention was to consult separately on the recommendations by the end of 2015. The consultation document now published fulfils that commitment.
The deadline for comments to the consultation is 11 March 2016.
View Consultation on Financial Policy Committee powers of direction in the buy-to-let market, 17 December 2015