To be clear, such house price growth relative to earnings would not be at all unusual for the UK – over the five years leading up to the crisis, house prices grew at three times the rate of income growth and there were about 70% more mortgage approvals per month than we have seen since 2014. And in the late 1980s, house prices again grew at well over twice the rate of earnings. 11  All speeches are available online at www.bankofengland.co.uk/news/speeches  11  Chart 6. LTI distribution of new mortgage lending(a)(b)  Sources: FCA Product Sales Database and Bank calculations. (a) The Product Sales Database includes regulated mortgages only. (b) LTI distribution of new mortgage lending in 2016 Q4 and at the end of an ‘upside’ 7-year scenario, with or without FPC Recommendations in place. There is a separate but related question about the extent to which the relatively subdued evolution of house prices and transactions between 2014 and 2019 was due to the FPC’s policy, including a general signalling effect on indebtedness. But general economic developments (for example, weaker than forecast economic growth, the post referendum inflation squeeze on incomes, and general Brexit uncertainty) and housing policies beyond the central bank (such as changes to Buy-to-Let tax treatment) have probably played the bigger role. And the flow limit of 15% has never ‘bitten’ in aggregate – since the policy was introduced flows of new mortgages at or above four and a half times income have not exceeded 11%.
While Bank Negara Malaysia will continue to strengthen the consumer protection framework through enhanced disclosure standards, effective dispute resolution mechanisms, and promotion of fair practices, banking institutions must also play their role. An important aspect is to ensure that consumers are adequately equipped with the relevant information to minimise the risks of poor financial decisions and their consequences. Market practices and disclosure standards must be fair and comprehensive so as to ensure that consumers are treated equitably and have access to adequate and timely information to facilitate effective decision-making. Ladies and Gentlemen, In this recent year, Bank Negara Malaysia has put in place two important infrastructures within the banking sector, the first being the framework for the establishment of Islamic subsidiaries, and secondly, the merger of commercial banks and finance companies within the same banking groups. These frameworks have paved the way for banking institutions to further rationalise their operations and improve efficiency. Both allow for the operations to be now undertaken within a new structure where the operations will be able to leverage on the group infrastructure, including the branch network and the support functions, to maximise cost efficiency and reap the benefits of group synergies. A number of banking institutions have already capitalised on the opportunities provided by these frameworks. Going forward in 2005, Bank Negara Malaysia will finalise a number of key regulations for the banking system.