THE BANK of England has warned that a rise in riskier mortgage lending could impact financial stability.
The record of the central bank’s latest Financial Policy Committee (FPC) meeting, which was held on 12 March, said that there had been “a gradual loosening in credit conditions in the mortgage market in recent years”.
While mortgages with the highest loan-to-value ratios of 95 per cent or more were significantly below pre-crisis levels, mortgage lending with LTVs just below that has “recovered from its crisis troughs”, the committee said.
However, the FPC noted that easier credit conditions had not boosted mortgage borrowing in general. It said that a rise in owner-occupied mortgage lending has been offset by a dampening of demand in the buy-to-let market, most likely due to tax and regulatory changes.
The Bank also noted risks to the financial system stemming from rapid consumer credit growth and household indebtedness and warned that prices in the UK commercial property market are approaching the top end of “sustainable values”.