Bank of England may intervene with access to credit
August 30, 2010
It has been reported that the Bank of England may take measures to restrict access to mortgage loans capping them to stop lenders giving out risky loans. The claim comes from a senior official from the Bank of England. Charlie Bean, the Deputy Governor from the Bank of England, said that ‘direct constraints’ may be required to restrict access to risky mortgage loans.
According to the report home buyers looking to take out mortgages could be forced to put down higher deposits of at least 10-15 percent of the property value. Whilst many lenders have been demanding higher deposits from borrowers for some time this sort of intervention from the Bank of England could make it mandatory for lenders to demand higher deposits.
This is said to be the first time that a senior official from the Bank of England has indicated that the central bank may take action to directly intervene and reduce the chances of borrowers taking out risky mortgage loans. The measure could be taken as part of new powers that are set to be given to the central bank under the government’s restructuring of the Financial Services Bill, which is set to take place later on this year.
However, there are concerns that this move could further damage the property market, which is already experiencing difficulties as a result of many would be buyers being unable or unwilling to take on mortgages in the current climate.
A broker from London and Country Mortgages said: “The mortgage market is still very slow and the biggest hurdle at the moment is boosting the availability of home loans not restricting them. Very few first time buyers can afford a big deposit so it is important that they are not excluded.”
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