The British Bankers Association has come out in support of the Bank of England's intention to impose a limit on mortgage loans.
Says a post by policy advisor Nicholas Smith on the company's website: “the BBA and its members broadly support proposals from the Prudential Regulatory Authority to limit the number of mortgage loans greater than four-and-a-half times a customer’s income.
"Loan to Income (LTI) ratios should enhance the resilience of the UK financial system by tempering house price rises and ensuring that customers aren’t taking on too much debt.”
The cap is imposed by the Prudential Regulation Authority, on recommendation from the Financial Policy Committee that mortgage lenders make no more than 15 per cent of their total secured loans at an LTI (loan to income) ratio of 4.5 or higher.
The consultation period for this law ended on August 31st and its purpose seems to be keeping the number of unmanageable debt and proportion of possible defaults as low as possible. Read the full paper here.
The BBA's endorsement comes with a caveat, however: the super rich, who Mr Smith assures us should be excluded from the rule for the sake of the private banks that cater to them. 23,000 jobs and millions of pounds in trickle-down wealth the country attracts from all over the world depend on it.
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