The Bank of England's new approach to mortgage restrictions better targeted than LVR policy - NZIER Insight 46
July 2, 2014
Just last week Mark Carney, the Governor of the Bank of England, tightened the rules on mortgage lending in the United Kingdom. Now loans set at more than 4.5 times income can make up only 15 percent of new mortgage lending. We like this approach to financial stability because it directly targets risk: can people afford to pay back their mortgage? In contrast, restrictions on the loan-to-value ratio (LVR) do this only indirectly.