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BoE director notes growing ‘risky’ mortgage lending

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A Bank of England director has today urged caution over rising levels of risky mortgage lending.

This includes mortgage lenders loosening credit standards, according to Bank executive director for financial stability strategy and risk Alex Brazier.

Speaking at Imperial College today, Brazier said a slowing in buy-to-let and new buyers had “masked the effect of looser credit supply to owner occupiers”.

City AM reports that Brazier adds: “Mortgage rates have fallen materially relative to Bank rate, especially at the riskier end of the lending spectrum And lenders are now prepared to take a bit more risk.”

Brazier added: “There is no flashing warning light here telling us to pull over urgently. There is, perhaps, the light that reminds us the car is due for a service.”

The Bank executive says this ‘risky’ mortgage lending could hit lenders if the economy slows.

He says: “Developments in corporate credit, consumer credit and in the mortgage market could be signs of a more generalised pick-up in risk taking. And when risk taking increases, it must not be at the expense of the resilience of lenders to any future downturn in the economy.”

Brazier’s words echo the thoughts of the Bank’s Financial Policy Committee.

The March FPC minutes say there has “been a gradual loosening in credit conditions in the mortgage market in recent years” for owner-occupier loans.

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