Sir John Gieve – who is about to step down from the role – said the possible measure could help policymakers ensure financial stability.
Loan to income and loan to value ratios tend to rise in credit booms as lending standards become lax and prices inflate, Sir John told the London School of Economics.
“In theory, a ceiling on these ratios could have provided an effective brake on the excesses of the last boom.
“If problems are concentrated within the property market then caps on loan-to-income and loan-to-value ratios might be effective,” he said.
Sir John suggested the measure as part of a package of “counter-cyclical” moves designed to protect the economy, such as requiring banks to build up extra reserves in the good times to draw on in a downturn.
Lenders have already drastically tightened their lending criteria since the credit crunch struck, with some pulling out of the market completely as wholesale funding routes have become much more expensive.
Nationalised Northern Rock’s infamous Together mortgage was a sign of the boom times, lending borrowers up to 125% of the value of their homes.