The Bank of England Thursday asked the government for powerful new tools to curb real-estate lending, underscoring officials' concern over the potential risk to the UK economy from the housing market.
The request, from the central bank's Financial Policy Committee, which safeguards financial stability, follows a move in June to curb riskier types of mortgage lending in response to deepening concern the UK economy was at risk from a potentially destabilising housing bubble.
Rapidly-rising prices had fueled concern at both the Treasury and the central bank that Britons were at risk of taking on debts they may have struggled to repay.
Chancellor of the Exchequer George Osborne in June asked the FPC to set out the tools it thought it needed to curb housing-market risks.
In response, the FPC said Thursday it has asked the Treasury to grant it control over loan-to-value ratios, allowing it to cap how much home buyers can borrow relative to the value of the property they wish to buy.
The panel also asked for the power to set a limit on overall household debt relative to income -- not just mortgage borrowing -- including the ability to set an interest-coverage ratio for landlords, limiting the size of their loan repayments relative to the rent they charge.
"The FPC judged that, taken together, these instruments were necessary, and should be sufficient, to tackle risks to financial stability," the panel said.
The Treasury will now consider the BOE's request.
Mr Osborne this year also asked the FPC to make an annual assessment of his Help-to-Buy scheme, which subsidizes mortgages, in case it threatened to undermine financial stability.
The FPC said Thursday it won't recommend any changes to the program. "Under current market conditions," the panel said, "the scheme does not pose material risks to financial stability."
Financial Policy Committee wants loan-to-value ratios control, overall household debt-to-income caps.
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