The government has confirmed the Banks of England’s Financial Policy Committee (FPC) will be handed extra powers over the housing market.

The FPC will be given control of the direction of the housing market as well as a leverage ratio for banks in the country.

Andrew Tyrie MP, chairman of the Treasury Committee, said it was important for such decisions to be taken out of the hands of politicians.

“The Parliamentary Commission on Banking Standards concluded that the Financial Policy Committee – not politicians – should set the leverage ratio. Today’s announcement is therefore very welcome,” he said.

“This power will be a valuable addition to the Bank’s toolkit for improving the safety of the financial system.”

He said restrictions on mortgage loan sizes would help prevent housing bubbles in future but warned the FPC would need to become more visible to the general public.

“The setting of limits on debt to income ratios and loan to value ratios for mortgages could help to tackle the economic and financial stability risks posed by an overheating housing market. However, there are limits to what can be expected of regulators: the identification of the cycle is an inherently extremely tough task. It could turn out to be insuperable.

“These new powers will affect millions of taxpayers and households across the country. The FPC is still largely unknown to the public and it is therefore crucial that it is transparent about how it reaches its decisions.”