May 29, 2014 / 1:03 PM / in 6 years

UK watchdog says too early to tighten home loan rules

LONDON (Reuters) - It is too early to tighten underwriting rules for home loans to cool what critics say is a housing bubble in parts of Britain, the head of Britain’s watchdog the Financial Conduct Authority said on Thursday.

The Bank of England’s Financial Policy Committee (FPC) meets next month to decide whether action is needed to keep the financial system stable after house prices notched up double digit rises, raising fears of a crash in the making.

The BOE also worries that some homeowners will be too stretched once interest rates rise, perhaps from next year.

The FCA, which introduced tougher underwriting rules for home loans from banks in April, said the new standards were starting to bite and changing the market.

“We are starting to see some slowing down,” FCA Chief Executive Martin Wheatley said in an interview with Bloomberg News.

Tightening the two-month old underwriting rules further is one option for the FPC, but Wheatley was unconvinced.

“I think we just have to monitor. I think it’s too early to tell,” said Wheatley, who sits on the FPC.

Other options the FPC has include forcing banks to hold more capital in case home loans default.

Reporting by Huw Jones; editing by Susan Thomas

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