British central bank's mortgage powers beefed up to avoid housing bubble

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British central bank's mortgage powers beefed up to avoid housing bubble

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Britain’s finance minister George Osborne is to give the Bank of England stronger powers to curb mortgage lending.

Domestic property prices in the UK are super-hot , having by 11 percent over the past year and are back close to pre-crisis levels.

The move was welcomed by Bank of England Governor Mark Carney, who has said that the housing market still poses the biggest domestic risk to financial stability.

In the future, the central bank will be able to stop Britons taking out mortgages that are too big compared with their income or the value of their home, rather than just making suggestions to lenders as it does now.

Osborne said the housing market was not an immediate threat to Britain’s financial stability but could become one in future.

“I want to make sure that the Bank of England has all the weapons it needs to guard against risks in the housing market,” he said in a speech to London’s financial community.

The International Monetary Fund recently urged he British government to take steps to cool the housing market and reduce the risk of a bubble.

Shares in Britain’s housebuilders and property developers fell on Friday in reaction, even though Osborne also announced changes to planning rules that he said would allow as many as 200,000 homes to be built on former industrial sites in urban areas.

with Reuters