The call from Lib Dems came as a result of recent figures from the British Bankers Association, which showed a further increase in mortgage lending.
Liberal Democrat shadow chancellor, Dr Vince Cable MP claimed the rise in lending was fuelling the housing market and despite recent interest rate rises and warnings from the Bank of England people were not being deterred from borrowing.
“An active policy of using bank reserve requirements would stop some of the excesses which threaten serious financial difficulty for many borrowers when the market goes into a downturn,’ he said.
Reserve requirements would force lenders to lodge a proportion of their assets with the Bank of England. By changing the size of these requirements it could control the ability of lenders to offer loans.
Sarah Pick, press and public affairs officer for the Building Societies Association countered: “There is an affordability testing procedure in place that is strictly adhered to. It is not our policy to over lend to clients and if there is a market change we are always on hand to advise people accordingly.”
Andy Frankish, operations director for Mortgage Talk said: “To call for a limit on mortgage lending is a sweeping statement. People need to borrow and home ownership helps to provide economic stability.”
