CML chief issues warning on mortgage caps

Mortgage caps that would force buyers to find bigger deposits or impose new limits on the amount people could borrow would "freeze up the market" and choke off the recovery, the head of Britain's mortgage industry body has warned.

Paul Smee, director general of the Council of Mortgage Lenders, said "crude" caps on the amount people could borrow as a multiple of income or property value would undermine efforts to balance the market.

"Caps would lock people out, it would make it difficult for people to move. I think it would detract from and undermine what we're trying to achieve with the overall regulatory regime by putting a crude layer on top," he said.

By 2015, the Bank of England's Financial Policy Committee, in charge of financial stability, will have sweeping powers to stop the UK economy boiling over.

While Mr Smee agreed that measures should be in place to prevent another crash, he told the Telegraph that members were concerned that the FPC could take disproportionate action.

"There is a worry among members that something will be done that will end up with the benefit of hindsight as a bit broad brush and heavy handed.

"We're looking for a laser beam of intervention rather than a blunderbuss."

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