The Bank of England is mulling over plans to impose stricter restrictions on home buyers in order to prevent another credit crisis, the Bank of England's Deputy Governor Charlie Bean said.
Mr. Bean said that imposition of stricter restrictions would prevent people from taking out risky home loans. He added that Risky lending could be slashed so that potential buyers would have to put down deposits in the range of
10-25 per cent to receive a mortgage.
It may be noted here that prior to the past credit crisis mortgage lenders moved towards greater loan-to-value ratio. They used to sometimes offering up to 125 per cent of the property’s value to customers.
Experts are against such risky mortgages as they believe that such mortgages played an important role in bringing in credit crunch.
Mr. Bean is the first person of his rank who has indicated that the Bank could interfere directly with loan-to-value ratios in mortgage lending.
But, some mortgage experts have warned that the Bank’s interference directly with loan-to-value ratios in mortgage lending could prevent first-time buyers from having their own houses.
The Government has plans to make the Bank of England responsible for regulating the banking market from the autumn.