George Osborne has announced that he wanted to give the Bank of England more powers to regulate buy-to-let mortgages.
The announcement which came out of the blue is in response to Mark Carney the head of the Bank of Englands repeated warnings that a buy-to-let bubble could represent a threat to the stability of the economy.
Changing Housing MarketThe changing housing and mortgage market now means that the proportion of Britons owning their own home has fallen to a 26 year low. Many house buyers are unable to obtain a large enough mortgage to enable them to buy there own home and the Chancellor responded to an overheating London housing market by restricting banks to be able to lend no more than 15% of mortgages to people borrowing over 4.5 times their income. Despite the worries over an overheating buy-to-let market lending still remains below the amount borrowed in the boom just before the financial crash.
Up until recently the Chancellor had resisted calls by the Bank of England for greater controls over buy-to-let mortgages. However, he has now responded to MPs questions by stating:
"The Governor of the bank and the FPC (Financial Policy Committee) have asked for additional powers over buy-to-let mortgages, which weren’t included. We have granted those powers so that they have that tool as well.”
Previously in 2014 the Bank of England had asked the Chancellor for additional powers to cap the size of landlords mortgages based on their expected rental income. The Chancellor decided against this instead putting the matter out for further consultation and thereby 'kicking it into the long grass'.
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