The Financial Services Authority is to assume some responsibility for macroeconomic monitoring, although you might think this is a job for the Treasury or the Bank of England.
But I suppose three inputs are better than one, and there’s probably a joint economic stability taskforce on the lookout for signs of the housing market overheating right now.
But how will this mechanism work? For example, if the housing market overheats, do those monitoring macroeconomic trends tell the Monetary Policy Committee to up interest rates or does the Bank or the FSA cap mortgage credit on a month-by-month basis?
Back in the 1970s, in the wake of a feast-to-famine scenario in the mortgage market, the government talked of creating a mortgage stabilisation fund.
This would be built up when rates were comparatively low and drawn on when rates rose against building societies – which had a monopoly at the time – and their inflow of funds shrank.
This was never implemented. Instead, societies agreed to a scheme which was implemented through the Joint Advisory Committee on Building Society Mortgage Finance.
This comprised representatives from the government and societies, and fixed a monthly mortgage lending figure to contribute to the stability of property prices and allow builders to plan ahead. It didn’t work and was abandoned in 1979.