Professor Philip Lane:

Our framework provides a good deal of protection and stability, and I re-emphasise that the core of the system is three and a half times the income. In the United Kingdom, it is four and a half times the income. There is a lot of lobbying effort taking place with a view to saying it should be four and a half time the income here. That is the linchpin in terms of anchoring the system. There is a limit to how much credit can fuel the housing market when we have that restriction.

Going above that, we have three layers of deposits. It is appropriate that first-time buyers have a lower deposit requirement than second time buyers. It is 10% for first-time buyers, 20% for second time buyers, and 30% for buy to let properties. We must remember that in the mid-2000s, much of it was buy to let properties coming in and competing with first-time buyers but when there is a 30% deposit requirement for buy to let, that restricts that.

There are many breaks in the system. We may have these temporary surges, especially in an economy where employment is growing strongly, wage increases are beginning to happen and so on.