Bank of England must act aggressively to curb house price growth
10-04-2014
Lord Turner, the former chairman of the Financial Services Authority, says introducing stricter caps on the amount people can borrow for a mortgage will make it easier for first time buyers to get on the housing ladder, not harder
By Szu Ping Chan, and Philip Allen
The mortgage market might be cooling, but prices are still growing at double digits in some areas.
Lord Turner, the former chairman of the Financial Services Authority (FSA), argues that much of the recent credit growth in Britain is not due to a surge in consumption, but to "purchase assets that already exist", such as housing.
He told the Telegraph: "I think we have got to try to create less credit against housing, and that means higher capital requirements for the banks against housing, loan to value limits, loan to income limits which will over time produce somewhat lower house price increases.
"We don’t want a house price crash, but we don’t want to return to another boom."
The Bank will soon have the power to directly cap the amount people can borrow as a multiple of their income or value of the property. Its recommendation to cap mortgage lending at no more than 15pc of new business where loans are more than 4.5 times income was designed to prevent future risks from emerging rather than addressing current risk. But Lord Turner argues the Bank should go further.