From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to www.ukfinance.org.uk for wider content and updates from UK Finance.

Last updated: 31 May 2017

At a glance

  • In addition to the regulation of individual lenders by both the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), lenders have to have regard to additional macro-prudential regulation in the form of directions and recommendations made by the Financial Policy Committee (FPC).
  • On 25 March 2015, Parliament approved regulations granting powers of direction for the FPC over housing tools - specifically limits on residential mortgage lending by reference to loan-to-value (LTV) and Debt-to Income (DTI) ratios. The measures came into force on 6 April 2015. (The FPC has published two draft policy statements on FPC powers over leverage ratio tools and FPC powers over housing tools.)
  • Following on from the consultation, on 16 November 2016, HM Treasury made the announcement that it was granting the Bank of England’s Financial Policy Committee (FPC) powers of direction in the buy-to-let market. 
    • This will mean that from early 2017, the FPC will be able to direct the PRA and FCA to require regulated lenders to place limits on buy-to-let mortgage lending in relation to:
  1. loan-to-value (LTV) ratios
  2. interest coverage ratios (ICRs)

CML position 

We support the strengthening of the regulatory architecture of the UK financial system, to create a more robust and stable system.

Given the number of recent additions to the macro-prudential regime, we would like a period of review and consolidation to evaluate how these developments operate in the market; and how macro-prudential regulation interacts with the concurrent developments in prudential and conduct regulation.

We question the use of FPC powers of direction and prefer the use of recommendations, where the relevant regulatory bodies (PRA and FPC) can engage in a consultation process with the industry.

Why this is important for lenders

Following the financial crisis, various stakeholders in the debate on the regulatory control of the UK financial system argued that a new approach was required. In particular, it was proposed that as well as the regulation of individual firms by the FCA and PRA, it was necessary to impose regulatory oversight of the financial system as a whole. As a result, the FPC was created to implement macro-prudential regulation designed to maintain the stability of the financial system.

So far, macro-prudential regulation has focussed on measures affecting the UK housing market, owing to the size of the UK housing market in relation to the UK economy and the impact that issues in the housing market could have on lenders and the wider economy.

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