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Detail of outcome
The consultation response document summarises the comments received on the FPC’s housing market tools consultation and the FPC’s leverage ratio framework consultation. It then sets out the government’s decision on the issues raised. The responses to the FPC’s housing market tools consultation can be found in chapter two of the consultation response document. The government has also published an impact assessment relating to the powers being granted to the FPC over housing market tools.
In his Mansion House speech on 12 June 2014 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”. He said that HM Treasury would consult on the tools, and that they would be in place before the end of this Parliament.
In response to the Chancellor’s announcement, on 2 October 2014, the FPC recommended that it be granted powers of direction over housing market tools in relation to owner-occupied mortgages and buy-to-let residential mortgages. Specifically, the FPC recommended that it be granted the power to direct, if necessary to protect and enhance financial stability, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) to require regulated lenders to place limits on mortgage lending, both owner-occupied and buy-to-let, by reference to:
- Loan-to-Value (LTV) Ratios
- Debt-to-Income (DTI) Ratios, including Interest Coverage Ratios (ICR) in respect of buy-to-let lending
This consultation aims to gather views on whether the powers of direction over owner-occupied mortgages that the government is proposing to grant the FPC are necessary and should be sufficient, subject to the separate consultation on buy-to-let, to ensure that the FPC is able to address risks in the housing market.
We would like to hear from institutions that would be affected by the FPC’s powers of direction (ie PRA- and FCA-authorised firms) and associated bodies. We would also welcome responses from all parties interested in housing market policies.