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News - 17 June 2014

Mortgage Cap to be made available to banks

 Chancellor George Osborne plans to give the Bank of England the power to impose a cap on home loans related to income or the value of the house. Mortgage lenders, however, believe the new affordability tests are a bigger factor for those trying to buy a home and that a cap on the size of mortgage loans is unlikely to be "the first tool in the box" to cool the housing market.

 
The cap was announced shortly after Business Secretary Vince Cable said he was "appalled" that some banks had been lending five times a mortgage applicant's income, suggesting a "stable level" was up to 3.5 times.
 
In his speech, Mr Osborne said the Bank's Financial Policy Committee would be given the new capping power before the end of this Parliament.
 
But Kate Barker, a former member of the Bank of England's Monetary Policy Committee, said she was concerned that this was transferring too much power to the Bank.
 
Stuart Coleman, Manager of the Tax Department of ABDS comments:
“Borrowers now have to face stricter mortgage affordability rules, following the intervention of the regulator. This means that instead of relying on an applicant's income as a measure of their ability to make repayments, lenders must also study these applicants' expenditure. They also check whether borrowers would be able to cope with rising rates.”
 
Mr Osborne also announced in his speech, reforms to planning laws designed to increase the supply of housing. These should provide permission for up to 200,000 new homes to be built and also plans for an "urban planning revolution" which would see councils forced to pre-approve brownfield sites for housing developments.
 
 
If you need any help and advice for your business on the implications of central and local Government Funding initiatives and the construction industry, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help
 
ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900 E-mail: abds@netaccountants.net
 
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Clear and precise with advice
Timely and cost effective
In touch with issues that face our clients
Mindful of our client’s long term strategic goals
 
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