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LONDON, Jan 14 (Reuters) - British banks offering over-generoushome loans that risk fuelling a future housing boom will have tohold extra capital to keep the financial system safe, the Bankof England said on Monday. Laws currently going through Britain's parliament will givethe Bank of England's Financial Policy Committee (FPC)wide-ranging powers, and on Monday the FPC said more about howthese would work in practice. The FPC said tougher rules could slow growth during a creditexpansion, but would be of long-term benefit by reducing therisk of a future financial crisis which could require taxpayersto shore up banks. "If these tools are successful in reducing the likelihoodand severity of financial crises, their use is likely to boostthe expected level of UK GDP," the committee said in a draftpolicy statement. "The best available studies point, on average, towards onlya modest negative impact on near-term growth if (capitalrequirements) are tightened." The BoE's Monetary Policy Committee could have lowerinterest rates than otherwise "to cushion the impact on growth"if tighter credit rules lowered the outlook for inflation, thereport said. Last year the FPC said it wanted two key powers, amongothers, to require banks to raise and lower capital ratios overthe course of an economic cycle, and also to impose capitalsurcharges on risky areas of lending like some property loans. Property booms and busts have been behind many of Britain'seconomic downturns over the past few decades and the centralbank hopes that the new tools will stop Britain's propertymarket from getting overheated in future. Monday's policy statement sets out the indicators that the FPC would use to check on the health of Britain's lendingmarket. These include ratios of house prices and commercial propertyprices to rents, how large a deposit new borrowers need as wellas broader measures of how rapidly banks are increasing othertypes of lending. It may be some time before the FPC feels a need to tightenrules, however. Current mortgage approval levels are far below those seenbefore the financial crisis unfolded in 2007-2008, and in Augustthe BoE launched a Funding for Lending Scheme aimed at boostinglending to home-buyers and businesses. (Reporting by David Milliken and Huw Jones)