The governor of the Bank of England has issued a warning that proposals by the UK government to relax limits on riskier mortgage lending could start a new wave of home repossessions.
The Financial Times reports that Andrew Bailey warned Parliament that he was “very happy to have a very open public debate” about the restrictions that define the nation’s mortgage lending guidelines. But Bailey also warned Parliament to acknowledge the “better outcomes” these rules had created by preventing a spike in home loan defaults during the recent economic tumult.
“They have helped to avoid the creation of a large tail of mortgages, which, when we have the inevitable cyclical downturn or shocks that hit the economy, turn out to be a real problem of the sort we have seen in the past,” Bailey said. “So, I think that has been beneficial.”
Bailey added that while he supported Prime Minister Keir Starmer’s effort to strengthen the economy, he declared “there isn’t a trade-off” between that goal and the Bank of England’s mission of preserving financial stability.
While Bailey said the Bank of England was reluctant to further loosen restrictions on British banks’ mortgage lending, another regulatory agency – the Financial Conduct Authority (FCA) – offered proposals that go in the opposite direction of Bailey’s plea. UK Chancellor Rachel Reeves supported the FCA’s approaching, stating she was “absolutely open to looking at ideas that can boost homeownership and help working families get on the housing ladder.”