A cap on mortgage lending is planned by the Bank of England in order to prevent another credit crisis, it was reported last night.
Risky lending could be cut back so that prospective buyers would have to put down deposits of between 10 per cent and 25 per cent to get a mortgage.
Bank may restrict mortgage lending
Charlie Bean, the Bank's Deputy Governor, said constraints may be needed to restrict the scale of lending as part of a multifaceted package to stabilise the economy.
The measures, reportedly set out in a speech to other central bankers in America at the weekend, would also include setting interest rates and making sure banks had enough capital to keep them afloat.
This is the first time an official of his rank has suggested the Bank may intervene directly with loan to value ratios in mortgage lending.
It would mean the return of a scenario Britain last saw in the 1980s, when credit controls, which were later scrapped, made it difficult for borrowers to get a mortgage.
Under new laws expected to be introduced by the Chancellor, George Osborne, the Bank of England would be responsible for regulating the banking market from the autumn.
Mortgage experts have voiced concerns that the proposals would stop first-time buyers getting on to the housing ladder.