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The mortgage industry is bracing itself for further restrictions on lending as the Treasury and Bank of England seek to prevent a house price bubble.

Chancellor George Osborne has warned he may introduce more curbs on the housing market to ensure a "responsible recovery" for the economy.

Osborne was speaking ahead of his autumn statement to Parliament on Thursday, when he will update MPs on the state of the economy and the public finances.

This follows the shock scrapping of the Funding for Lending Scheme last week, which left many brokers and lenders wondering which support would go next.

Nicholas Ayre, managing director of homebuying agency Home Fusion, said the decision to scrap FLS showed the Bank of England is now paying attention to what is happening in the market more closely.

And he suggested the Bank could go a step further, and introduce rules controlling LTVs.

"Mark Carney is starting to be the wise voice of the house-buying consumer in an effort to ensure buyers don’t over-stretch themselves.

"It might also be an indication that he might increase his sphere of influence further and possibly into controlling LTVs, as he did in Canada when he was in charge there."

The Building Societies Association has warned that Bank interference could prevent credit worthy first-time buyers in getting into the housing market, and cautioned against introducing limits on LTVs or other measures, such as loan-to-income. It said the industry should be consulted first.

Jonathan Hopper, managing director, Garrington Property Finders, warned the Bank's recent actions could hit the recovery.  

"Although the London market has momentum, that is absolutely not the case outside the capital, where buyer confidence is still very fragile.

"Stopping FLS now could have a dramatic effect on the housing market recovery. It is unlikely to slow down price growth in London but could have a devastating impact on areas which have only just started to see the benefits of cheaper lending.

"All the eggs are now in the Help to Buy basket. If the second stage of Help to Buy doesn't work then this housing market recovery could end before it's really started."


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