To ask Her Majesty’s Government whether they believe loan to value ratios or loan to income ratios to be the more reliable indicator of systemic instability in the residential mortgage market; and what stress assumptions lenders in the Help to Buy Scheme have been asked to use about future interest rates.

The Government has established the independent Financial Policy Committee to monitor the stability of the financial system as a whole with a view to ensuring that emerging risks and vulnerabilities are identified and effectively addressed. This includes monitoring developments in the housing market.

The FPC’s power of Direction over sectoral capital requirements can be applied to three broad sectors including residential mortgages. The interim FPC published a draft policy statement in January 2013 in which it set out a number of core indicators that the Committee will monitor to help guide its use of sectoral capital requirements. The draft policy statement can be found on the Bank’s website: http://www.bankofengland.co.uk/financialstability/Pages/fpc/coreindicators.aspx

The Government has put in place requirements to ensure responsible lending under the Help to Buy mortgage guarantee scheme. In their affordability assessment lenders must conduct an affordability stress-test against future interest-rate rises.