FPC & Carney - Do....well, nothing

Graham_Devon

They have limitied the proportion of loans any bank can hold of above 4.5x income to 15% of the loan book.

Currently, the banks hold 11% of loans above this cap, according to Peston, so this cap doesn't actually effect anything. Carney is keen to make the point that he is looking at future risk, not risk today.

The other recommendation, not rule, is that banks should check whether those taking on mortgages could afford the mortgage if their mortgage rate (not bank rate) rose 3%. This is effectively a very minor change to current MMR policies and will likely have no impact at all on anything.

News article: http://www.bbc.co.uk/news/business-28016952

Pestons reaction: http://www.bbc.co.uk/news/business-28035658

Generali

What were you hoping for?

wymondham

I've been reading this on the BBC site. Very odd to make an announcement that does not really have any current impact, and also say that a 20% rise in London prices is not seen as a bubble... what would class as a bubble?

Graham_Devon

Generali wrote: »

What were you hoping for?

Well, like the majority, I was at least expecting something on HTB.

So many economists, even those directly linked to the BOE etc have suggested reducing the limit to £300,000 it seemed almost a given. Infact, it's just been said on the news that "they" are stunned that given this opportunity nothing was done.

With all the talk Carney has done lately on "will not hesitate to use the tools" I thought, maybe naively, he would use them. Instead, they remain "vigilant".

Generali

wymondham wrote: »

I've been reading this on the BBC site. Very odd to make an announcement that does not really have any current impact, and also say that a 20% rise in London prices is not seen as a bubble... what would class as a bubble?

Bubbles are about borrowing more than price rises. Much (most?) of the increases in London house prices are apparently due to cash purchases. There's nothing that the BoE can do about that.

danothy

The previous self imposed limiting of income multiples associated with large loans by certain banks came at the right sort of time to be ahead of this. Almost as if they knew it was going to be tabled ... surely that would mean that the banking industry had better access to information than your average armchair commentator though, and that is an absurd notion.

Generali

Graham_Devon wrote: »

Well, like the majority, I was at least expecting something on HTB.

If house prices in London, where there is a problem, aren't driven by HTB/debt then cancelling HTB would be ineffective at best.

Can the BoE cancel HTB anyway? I thought that was a Government policy. The BoE isn't a political entity.

Graham_Devon

wymondham wrote: »

I've been reading this on the BBC site. Very odd to make an announcement that does not really have any current impact, and also say that a 20% rise in London prices is not seen as a bubble... what would class as a bubble?

They seem to suggest they will take action if prices rise another 20% over the next 3 years.

So certainly on that evidence there is scope for some huge increases before they get involved or the policies announced today start to bite.

According to Bank projections, the new guidelines, which are open for consultation, will not begin to bite unless "momentum in the housing market continues to build". In its central projection, where house prices rise by 20pc over the next three years, mortgage approvals climb to 90,000 a month, and wages grow by 4pc, the measures will have no impact. However, if approvals climb to well above 100,000 a month and house prices continue to grow at double digit rates, the Bank said these policies, to be implemented by the Prudential Regulation Authority and Financial Conduct Authority would start to bite.

Basically a green light to HPI.

AndyGuil

Didn't think anything would change. They have just put a limit on the top end of current risk levels in lending which is just a precaution. Clearly their aim is not to inhibit the market in anyway but just take risk out of it carefully. Also the 3% interest increase check sends out a signal that this is the absolute upper end of expected possible interest rates for the foreseeable future.

Graham_Devon

Generali wrote: »

Can the BoE cancel HTB anyway? I thought that was a Government policy. The BoE isn't a political entity.

The government state that it is for the BOE and the FPC to suggest changes to HTB.

wymondham

Graham_Devon wrote: »

The government state that it is for the BOE and the FPC to suggest changes to HTB.

Sounds like everyone is sitting at a round table pointing to the person to their left to make the required changes!


I can see sudden knee-jerk changes occurring in the future when the opportunity to gradually introduce changes gets overtaken by events..