trending Market Intelligence /marketintelligence/en/news-insights/trending/eWVh5PwMjLE3RX9NMr44bQ2 content esgSubNav
Log in to other products

 /


Looking for more?

Contact Us
In This List

BoE mulls taking tougher stance on mortgage lending, deputy governor says

Blog

Banking Essentials Newsletter: May Edition

Blog

Latin American and Caribbean Market Considerations Blog Series: Focus on IFRS 9

Blog

Banking Essentials Newsletter: April Edition - Part 2

Blog

The Evolution of Cloud Banking: Successful Implementation & Frameworks


BoE mulls taking tougher stance on mortgage lending, deputy governor says

The U.K.'s central bank could tighten its oversight of the mortgage lending market and impose more floors on lenders' capitals amid the prevalence of risky lending practices and dwindling capital levels at banks and building societies.

Speaking before the Building Societies Association in London on May 24, Bank of England Deputy Governor Sam Woods said U.K. mortgage risk weights for lenders using internal models for their capital requirements have declined significantly over the last 10 years, allowing capital requirements to drop by a third. Woods, who also heads the U.K. Prudential Regulation Authority, attributed this to lower defaults and an increase in housing prices.

Woods pointed out a dramatic fall in spreads demanded over the risk-free rate, a marked shift in the high loan-to-value share of new lending by building societies and a significant increase in firms' appetite for higher loan-to-value and higher loan-to-income lending.

"Still, I think we should approach this trend with a very skeptical eye and need to consider whether there is a case to impose more floors in firms' models — particularly given the current stretch in some measures of house price valuation," Woods said.

The high number of mortgages issued in the past was one of the triggers for the 2008 financial crisis, with the BoE imposing a limit on the amount of new high-risk mortgages that banks can loan, the Financial Times noted.