The Council of Mortgage Lenders (CML) has responded to the Treasury’s consultation on giving direction powers to the Financial Policy Committee over housing market tools including loan-to-value and debt-to-income caps.
The CML has questioned why, in practice, the FPC feels it needs the power of direction – rather than recommendation – on LTV and DTI caps.
It believes that if the FPC does gain direction powers, it needs to put in place a parallel robust system of consultation on their use as a check and balance.
The CML also thinks that, given how heavily the owner-occupier mortgage market is now regulated, it is incumbent on the FPC to articulate the regulatory gaps it feels it needs to fill.
It argues that the Treasury should expect to see, and publish, an FPC review of the impact and effectiveness of the recently introduced LTI caps in the UK before deciding how to proceed.
In addition, the CML believes lending to high-net-worth individuals should be excluded from any limits on debt-to-income. However, it can see no justification for the exclusion of government schemes such as Help to Buy from the scope of the regulation, as currently proposed.
The CML also thinks that caution is needed on applying any new rules on the buy-to-let lending market, and welcomes the consultation on this, as it would be a major change with the potential for unintended consequences.
Paul Smee, CML director general, said: “Given the importance of the £1.3 trillion mortgage market, we recognise that it will inevitably be the sector that potentially bears the brunt of the impact of macro-prudential tools. We understand the need to hardwire in a clear understanding of how they would work in future, even though it is clear that no further intervention is needed under current market conditions.
“But the market already takes extremely seriously the FPC’s powers of recommendation, so we are not sure what powers of direction add.
“If the Treasury does decide to give the FPC these special powers, we think it is crucial that these should be accompanied by an ongoing commitment to proper consultation and communication with those who would be affected by them.”
