Chancellor George Osborne last night handed the Bank of England new powers to curb mortgage lending.

Specifically, it will be able to cap the size of mortgage loans in relation to incomes.

The power will come into play by the end of this Parliament, and was announced at last night’s annual Mansion House speech.

The move had been heavily trailed beforehand by business secretary Vince Cable – leading to estate agent Paul Smith accusing him of trying to kill off the first-time buyer market.

Cable yesterday called for mortgages to be capped at 3.5 times earnings, saying action is needed to stop the housing “boom” escalating out of control in parts of the UK.

He said that some banks had been throwing “petrol on the fire” by lending five times income.

Smith, CEO of haart estate agents, reacted angrily.

He said: “It’s not clear why Vince Cable wants to kill off first-time-buyers, vastly reducing their ability to get a mortgage and strangling the current housing market recovery.

“Indeed his proposals will also hold current home owners hostage in their own homes, as they will not meet the lending criteria when they chose to move on and need a bigger mortgage.

“Those coming to the end of interest-only loans will also come unstuck and be dealt a double whammy with the fallout from the Mortgage Market Review still trickling through.

“Cable’s flawed plan would also knock house builders for six. Where is the encouragement to build homes if people, ready and very able to buy, won’t be lent the money?

“The whole point of a mortgage is to help those who aren’t lucky enough to make a cash purchase and that’s the majority of the UK’s aspiring home owners, whichever rung they are on.”

However, according to new Council of Mortgage Lenders figures issued yesterday, the average income multiple for first-time buyers is not even as high as 3.5. In April it stood at 3.42.

For home movers, the average income multiple that same month was 3.03.

The CML also reported:

• The number of loans to first-time buyers rose by only 1% in April compared to March, but was 37% higher than in April 2013. By value, lending to first-time buyers was up 3% on March and 52% higher than in April last year.
• The number of loans to home movers increased in April by 11%, with the value up 15% compared to March. Compared with April 2013, growth was up 30% by volume and 47% in value.
• The International Monetary Fund has warned that house prices are too high in many countries and has called for action to prevent another devastating global housing crash. It says that in Canada, house prices are 33% above their long-term average in relation to incomes, and 87% above their long-term average in relation to rents. The figures for the UK are 27% and 38% respectively. In comparison, in Japan, housing is 41% below the long-term average relative to incomes, and 38% below in relation to rents.