Bank Of England to Control UK Real Estate Boom
In the wake of a struggling real estate market and a recession hit economy, financial institutions and banks of U.K. have been trying to come up with generous schemes and lending formats that could risk a sudden upsurge in the housing market of the country. To control the boom, British Parliament has given regulating powers to the Financial Policy Committee (FPC) of The Bank of England.
In a recent "Credit Conditions Survey" conducted by the bank, it was found that new lending methods helped increase the influx of money into real estate markets and the trend would continue in the coming year, reports the BBC.
Before the markets get out of control, the FPC plans on introducing tighter regulations and forcing banks to retain extra capital against high mortgage values, reports Guardian.
In a statement released Monday, FPC claimed that 17 new regulations have been conjured and it would be using the powers to keep a check on the lending market of U.K. Some of the regulations include checking the amount of deposits new borrowers require, ratios of commercial and residential properties to rents and keeping an eye on the types of bank lending activities popular in the market, reports the International Business Times.
The bank's watchdog committee hopes to use the powers to prevent any kind of market overheating. If the new regulations are adopted sincerely, the GDP of the country would hike up. The FPC also claimed that the regulations would stifle current growth but would be profitable in the long run by avoiding any financial crisis, reports Reuters.
However, the rules will not be immediately tightened as mortgage sanction levels are far lower than what it were during the financial crisis of 2007-08, reports The Chicago Tribune.