BofE could hit lenders with new charges to dampen property prices

In December, house prices staged their largest monthly rise in four years as the cost of the average home rose by 1.4pc, the greatest increase since August 2009. Year-on-year, property has risen by 8.4pc, according to figures from the Nationwide, which warned that "affordability may become stretched" if prices continued to rise at the current rate.

The FPC was created by the Coalition Government as part of its reform of British financial regulation. The 10-strong committee is chaired by Mark Carney, the Governor of the Bank of England, and its members are drawn from across the Bank and the UK’s two financial regulators, as well as former senior financiers, including Martin Taylor, a former chief executive of Barclays.

According to Deutsche Bank, if the FPC were to vote for an increase in the capital requirements on UK mortgages it could cost Lloyds Banking Group, Britain’s largest provider home loans, about £1bn in extra capital and a further £1.45bn for the country’s other major banks.

Regulators in other countries frequently use targeted capital requirements to control house prices. In Hong Kong the use of higher capital charges on mortgages is the main tool used by the authorities to control the province’s property market.

However, in the UK the use of such a tool to limit mortgages could prove controversial and regulators have warned in recent years about the public anger that could be caused by their use.

Michael Cohrs, a former senior banker and until last year a member of the FPC, said in 2012 that to “take away the punch bowl” to end an “electorally-popular credit boom” could prove controversial.

Mr Cohrs said: “To make a success of financial policy the FPC must be empowered to take decisions which are enforceable and which will have a real impact.”

Since taking over a Governor last year, Mr Carney has sounded warnings about the property market and in November the Bank of England scrapped its Funding for Lending programme to support lenders making new home loans.

A month earlier, Mr Carney said there was a need for “vigilance” to guard against the risk of a housing bubble.

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