“I think this is very important. We have said for a long time that the major constraint in our view is housing supply, not mortgages,” said Andrew Bailey when he appeared before the Treasury Committee this morning.  

Financial Policy Committee Carolyn Wilkins, also appearing before the committee, echoed the governor’s comments.  

Wilkins added: “When you have the price of houses, relative to income, that is so high there is no way around this.  

“There is no reduction in regulation that is going to solve that problem. It’s going to be about the growth in the supply of houses and sustainable growth in incomes.” 

Bailey’s evidence before the Treasury committee comes after the Bank’s Financial Policy Committee earlier this month allowed individual large lenders to lift their high LTI lending above 15% of all new mortgages as long as the aggregate share of lending among large banks and building societies remains below 15%.  

Previous Financial Policy Committee guidance, in place since 2014, had ruled that overall new residential mortgage loans greater than 4.5 times a borrower’s income should not exceed 15% by any large lender.  

In practice, this saw lenders restrict this type of lending below this level. It saw some larger lenders well below this level, while others had to cut back on this type of lending to remain inside the guidance.   

However, regulators have come under pressure, from government and institutions, to lift this cap to allow more home loans to be written, particularly to first-time buyers. 

Chancellor Rachel Reeves welcomed the move last week, adding that this, along with other home loan reforms, will lead to an extra 36,000 first-time buyer mortgages over the coming year.  

Nationwide has said this move will allow it to write around 10,000 more FTB loans over the coming year, while Lloyds Banking Group announced it would set aside an extra £4bn for high loan-to-income lending. Other lenders have also said they will raise their high LTI lending.   

The government plans to build 1.5 million new homes over the next five years, which the Bank sees as key to easing the country’s housing crisis. 

Average UK house prices rose by 3.9%, to £269,000, in the year to May, according to provisional estimates from the Office for National Statistics last week. This is up from 3.6% in the 12 months to April.

The Financial Policy Committee said in its latest report earlier this month: “UK house prices are high relative to incomes, and the rate of home ownership has been broadly flat since 2014. 

“From 1997 to 2007, the average house price in England and Wales increased from around 3.5 to around 6.5 times the average annual household income and has remained around this level in most of the years since.  

The report added: “These high multiples mean that prospective FTBs typically need both a large deposit and a large loan relative to their incomes to be able to access a mortgage. 

“The average deposit paid by FTBs was around 60% of their household income in 2024. That said, the share of new lending to FTBs remains high at 53% in the first quarter — having increased from 33% before the global financial crisis — and is near its highest point since the early 1990s.”