Monday, June 30, 2014

Bank Of England Imposes Limits On Household Loans


Fri., June 27, 2014
The Bank of England has imposed limits on household borrowing for the first time since 1980 in a bid to stop a credit boom emerging amid surging house prices, theIrish Times reported. The restrictions on large loans imposed by the bank’s financial policy committee will not affect current lending, but it will seek to prevent lending from taking off as the UK economy recovers. The central bank expects house prices to rise a further 20 per cent. In putting a cap on the proportion of large mortgages a bank can issue compared with borrowers’ incomes, BoE governor Mark Carney warned that he would not countenance a further credit-fuelled housing boom. “This is the limit of our tolerance, and that is why there is a cap in place,” he said. He added that the measures “will prevent lending getting too far ahead of income growth, and they’ll prevent a slide into riskier lending and higher indebtedness that could undermine the economic expansion over the medium term”.

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