Bank of England could cap high LTVs

Chancellor George Osborne has said that the Bank of England may be given powers to stop high loan-to-values in mortgage lending in order to “curb a sharp, unsustainable rise in house prices".

The new Financial Policy Committee (FPC), which will sit within the Bank of England, could force mortgage lenders to hold more capital to stop credit bubbles growing out of control.

Commenting on Osborne’s threat to cap mortgage LTVs, Karen Barrett, chief executive of unbiased.co.uk, said: “George Osborne’s suggestion that the Financial Services Bill could give the new Financial Policy Committee powers to cap LTV ratios will no doubt unsettle home buyers in general and first-time buyers in particular.

“Saving for a deposit big enough to be able to access a competitive mortgage deal is one of biggest problems for first-time buyers at the moment. While we have seen several high LTV products re-enter the market, first-time buyers still struggle to make that first step on the property ladder.

“We have seen a sharp rise in enquiries over recent months from first-time buyers for whole of market mortgage advice and FTB is now the most sought after advice area on our ‘find a mortgage adviser’ search.

“In January 2012 enquiries for first time buyer advice rose to 41% of all enquiries, up from 36% in December 2011 and 33% in November 2011, highlighting that more and more people are actively looking for help with their financing options.”