Industry braced for BoE intervention

The FPC’s recommendation for interest rates to be stress tested against a 3% base rate increase and for a 15% cap on new loan volume above 4.5x loan to income takes place this month.

Brokers and lenders think the 3% stress test will have the bigger impact of the two measures, as 54% and 26% think it will have a high impact respectively. In terms of the 4.5x cap just 11% of lenders and 34% of brokers think it will have a significant impact.

Peter Williams, executive director at IMLA, said: “Market interventions have been reasonable to date, but an immediate push for further regulation would be excessive, especially when house price growth appears to be slowing.

“Using credit policies to compensate for weak supply in the housing market can have a major impact on who can borrow at an individual level and is no replacement for a long term supply solution.

“Lenders are focused on fulfilling their side of the bargain and a future where regulatory restraint prevents them from helping creditworthy consumers is a no-win situation.”

The research also revealed that optimism in the market has cooled, as 44% of lenders and 41% of brokers think that market conditions were improving in Q3 2014, down from all lenders and 90% of brokers in Q1 2014.

Nearly half (45%) of mortgage brokers went further, stating that conditions have worsened in Q3.

In the third quarter 31% of lenders and 38% of brokers also thought house price growth is unsustainable, up from 13% and 25% in Q1.