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The FPC has spoken - now, let's move on


Published: 1 July 2014 | Author: Bernard Clarke

Stephen Noakes gives his reaction to last week's intervention by the Bank of England on stress-testing and loan-to-income multiples.


As widely predicted, the Bank of England’s financial policy committee (FPC) last week announced proposed interventions in the housing market to guard against over-heating and risks to the wider economy. 

On the one hand, it proposes more prescription about the rate against which lenders should stress test the loans they advance; on the other, a cap on the percentage of lending being done at the highest loan-to-income multiples.

The steps taken by the FPC are proportionate to the risks we currently face.  It has resisted political pressure to take tougher action and put forward proposals that the industry would understand and accept"Importantly, however, both of these moves are broadly in line with where the industry already is today. The FPC is implicitly saying that there is no evidence of a national housing bubble at the moment, but we’d like to take some steps now to ensure we don’t see one in the future.

As such, I feel that the steps are proportionate to the risks that we currently face. The FPC has resisted any political pressure to take tougher action and has put forward proposals that I think most of us in the industry would understand and accept.

At this stage, however, we still haven’t seen the results of the stress tests.  Perhaps we will take a different view in a few weeks’ time. For now, though, we can take comfort that the FPC’s view is broadly in line with our own – and move on.