The Bank of Zero

The Bank of England is so worried about the financial risk rising from roaring house prices that it has decided to do, er, nothing.

It is forcing banks to stress-test future mortgage loans, measuring how you would cope with interest rates around 3 per cent higher. But banks are already doing this.

It is forcing banks to limit the number of mortgages lent at 4.5 x income to 15 per cent of the total. But no bank is currently lending more than 11 per cent.

The bank is also setting a new “capital buffer” to guard against boom and bust. The buffer has been set at zero. Yes zero.

What this means: it will be no harder to get a mortgage tomorrow than it is today, but if prices rise and incomes don’t, eventually these rules will choke off the excess. The bank’s central scenario is 20 per cent house price rise by 2017.

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