Investing.com - The Bank of England said Thursday it is modifying its Funding for Lending Scheme, which was launched last year to boost mortgage lending, in response to what it called “evolving risks” to financial stability.
BoE Governor Mark Carney said the Funding for Lending Scheme will no longer be aimed a house buyers, while presenting the bank's semi-annual Financial Stability Report.
Carney said an overheated housing market would be a risk to the economy and added that supporting mortgage lending was "no longer necessary".
The bank said house-price inflation has gathered momentum and warned that risks to financial stability may build if there is a rapid increase in house prices and consumer indebtedness.
“Although the growth in household loan volumes remains modest, activity is picking up and house price inflation appears to be gaining momentum," Governor Carney said in a letter to Chancellor George Osborne.
The decision to remove mortgage lending from the Funding for Lending Scheme was taken jointly with Chancellor Osborne, Carney said.
The Funding for Lending Scheme will only apply to businesses from January 2014.
Speaking about the government’s Help to Buy Scheme, which provides subsidies to home buyers for deposits, Carney said it was "still early days," but added that the bank may step in “at any time.”
The bank said the changes would not have any material impact on the outlook of the monetary policy committee.
The package of measures I have described today will contribute to a constructive evolution of the housing market,” Carney said.
“By reinforcing financial stability, they further reinforce the monetary policy committee’s ability to provide exceptional monetary stimulus to the entire U.K. economy for as long as it deems appropriate.”
On the economy, the bank said that risks to financial stability appeared to have diminished as a result of the stronger outlook for growth.
BoE Governor Mark Carney said the Funding for Lending Scheme will no longer be aimed a house buyers, while presenting the bank's semi-annual Financial Stability Report.
Carney said an overheated housing market would be a risk to the economy and added that supporting mortgage lending was "no longer necessary".
The bank said house-price inflation has gathered momentum and warned that risks to financial stability may build if there is a rapid increase in house prices and consumer indebtedness.
“Although the growth in household loan volumes remains modest, activity is picking up and house price inflation appears to be gaining momentum," Governor Carney said in a letter to Chancellor George Osborne.
The decision to remove mortgage lending from the Funding for Lending Scheme was taken jointly with Chancellor Osborne, Carney said.
The Funding for Lending Scheme will only apply to businesses from January 2014.
Speaking about the government’s Help to Buy Scheme, which provides subsidies to home buyers for deposits, Carney said it was "still early days," but added that the bank may step in “at any time.”
The bank said the changes would not have any material impact on the outlook of the monetary policy committee.
The package of measures I have described today will contribute to a constructive evolution of the housing market,” Carney said.
“By reinforcing financial stability, they further reinforce the monetary policy committee’s ability to provide exceptional monetary stimulus to the entire U.K. economy for as long as it deems appropriate.”
On the economy, the bank said that risks to financial stability appeared to have diminished as a result of the stronger outlook for growth.