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Homebuyers Could Be Forced To Pay Bigger Deposits

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Mortgage lending could be ‘capped’ to stop borrowers taking out insecure loans, according to a senior Bank of England official.

The Bank’s Deputy Governor Charlie Bean said ‘direct constraints’ may be needed to restrict access to credit.

This could mean homebuyers being forced to put down sizeable deposits - for example, between 10 and 25 per cent of the home’s value - before being approved for a mortgage by their banks or building societies.

It is the first time that a senior official has indicated that the Bank may intervene directly with new rules to stop risky lending.

It is one of the possible new powers handed to the Bank under the government’s proposed restructuring in its Financial Services Bill due later this year.

Such a move would mark the return of ‘credit controls’ that were scrapped in the early 1980s and made it difficult for many borrowers to get a mortgage.

Before the credit crunch, banks and building societies lent up to 125 per cent of their property’s value, but many homeowners became stuck in negative equity when prices crashed during the credit crunch.

This weekend, Mr Bean published a policy paper at an international conference detailing how the Bank would approach its new role.

In a speech to other central bankers in America, Mr Bean raised the prospect for the first time of the Bank restricting the size of mortgages as part of a package of measures to stop the economy overheating.

In his speech, he said: ‘There is the option of introducing direct constraints on the terms or availability of credit, for instance imposing maximum loan-to value ratios in the mortgage market.’

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  • 415 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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