BoE Approves Mortgage Guarantee Scheme Asks For More Housing Oversight

The Bank of England gave a clean bill of health to Britain’s controversial flagship mortgage guarantee scheme on Thursday, sparing the government from potential embarrassment in the run-up to a national election.

The central bank also formally asked to expand its arsenal of powers to curb mortgage lending for homes and buy-to-let properties, and said it was bringing forward the date when it would put a figure on the maximum leverage banks can have.

Prime Minister David Cameron announced the Help to Buy mortgage guarantee scheme at his Conservative Party’s annual conference last year, saying it would aid home-buyers who could afford mortgage repayments but lacked a large deposit.

The plan was widely criticised by opposition politicians and many private-sector economists for risking pushing up house prices, which have since risen by around 10 percent.

However the BoE said Help to Buy was not to blame, as it only accounted for around 5 percent of mortgages and was most used in regions where house prices had risen least.

“The scheme does not appear to have been a material driver of (house price) growth – for example, take-up of the scheme has been weak in London where house price growth has been strongest,” the central bank’s Financial Policy Committee said.

Mortgage lending standards had not deteriorated since the launch of Help to Buy, and house prices appeared to be cooling sooner than the FPC had expected when it last met in June and imposed caps on general mortgage lending.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza