Policymakers at the Bank of England have moved to calm the property market by capping mortgage lending and making lenders do more to ensure house-buyers can meet their repayments.

Financial experts say it is thought to be a form of insurance against a damaging housing bubble in the future instead of a major effort to immediately eradicate the problem.

According to the Financial Policy Committee (FPC) at the Bank lenders should not provide more than 15% of mortgages with income to lending ratios of 1 to 4.5 to people buying residential property.

It also wants institutions that provide home loans to 'stress test' those borrowing money from them to determine whether they could still afford repayments if interest rates rise by 3% during the first five years of their mortgage.

The Council of Mortgage Lenders (CML) says across the UK just 9% of home loans are for amounts 4.5 times the incomes of borrowers, but in London this is the case with 19% of mortgages.

Stephanie McMahon, Head of Research at Strutt & Parker, comments: “In itself this ‘new’ cap on home loans, which will only allow 15 per cent of new mortgages to be granted at multiples higher than 4.5 times a borrowers’ income, is not as dramatic as it sounds. Over the past 12 months, no bank has gone over the 15% threshold - in fact the average for all banks over the past year has been just 11%.

The sense from today’s announcement is that the Governor is keen to show the market that he has the tools at his disposal to cool the market – but beyond flexing his muscles he is not willing to get them out just yet. It serves as more of warning shot than a full blown intervention.

The cap on mortgages will mean that those who haven’t been able to get on the housing ladder in recent years still can’t. On the other hand, cash-rich property buyers, from both the UK and overseas, who have invested heavily and driven up prices in prime central London especially, will be largely unaffected.

The introduction of stress testing at 3% could have more of an impact on the regular property buyer, although most mortgage providers were working to this figure already. Whether this will lead to decreased demand and a decline in house prices seems unlikely.

There is no doubt that the era of cheap money will be coming to an end – but it appears not for a little while yet.”

The changes are designed to insure against any housing market mistakes in the future, the Bank's governor Mark Carney says.

He adds that the Bank is not closing the door shut on high loan-to-income mortgages, as first-time buyers are likely to be able to afford higher repayments through career progression.