7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  Chart 1: Since 2010 we have seen a significant fall in mortgage spreads, particularly at higher LTVs Quoted 2-year 75% LTV spreads over risk-free rate  Quoted 2-year 90% LTV spreads over risk-free rate Percentage points  Percentage points  7  7  6  6  5  5  4  4  Spread  Spread  Risk-free rate  Risk-free rate  3  2y 75% LTV  3  2  2  1  1  0  0  2y 90% LTV  Source: Bank of England, MoneyFacts Notes: Risk-free rate is defined as 2 year overnight indexed swap (OIS)  Chart 2: We have observed a marked shift in the share of new mortgages at high LTV by building societies Major UK Lenders: share of new mortgages at high LTV  Building Societies: share of new mortgages at high LTV  35%  35%  30%  30%  25%  25%  20%  20% 85 ≤ LTV < 90  85 ≤ LTV < 90  90 ≤ LTV < 95 15%  LTV ≥ 95  90 ≤ LTV < 95 15%  10%  10%  5%  5%  0%  LTV ≥ 95  0% 2015  2016  2017  2018  2015  2016  2017  2018  Source: FCA Product Sales Database Notes: ‘Major UK Lenders’ include the large UK Banks and Nationwide.
So let me make it more real for you by giving some concrete examples of issues we have been working on in this broad area. As we mark today the 150th birthday of the BSA, an obvious place to start is the UK housing market. For deposit-takers including banks and building societies, this is the biggest single loan exposure, and it is also the biggest liability of UK households. And in insurance, firms are taking on more exposures to housing in response to the developing financial needs of consumers. So this will always be an important asset class for the PRA. But there are a number of areas to which we are paying particularly close attention currently. First, as all borrowers and lenders are well aware, we have seen something of a price war in the mortgage market over the last couple of years. This may be good news if you are, for instance, a young supervisor in the PRA looking to buy your first property. But it is less good news if you are a lender concentrated in mortgages, given the impact on net interest margins. The response of such lenders has been entirely unsurprising: a material move up the risk curve. You can see this absolutely clearly in several ways: a dramatic fall in spreads demanded over the risk-free-rate; a marked shift in the high-LTV share of new lending by building societies; and a significant increase in firms’ appetite for higher LTV and higher LTI lending (see Charts 1 to 4).