Taylor Scott International News
The UK’s expanding buy to let sector could be hit if plans announced by Chancellor George Osborne to regulate mortgages in this part of the lending market go ahead. The sector has been taken aback by Osborne’s announcement during a Treasury Committee hearing that he has already given the Bank of England additional powers to regulate the buy to let market. He had already said he would consult about such a move after Bank Governor Mark Carney said that the buy to let market could be a threat to the UK’s economic recovery. But now it seems that the Bank can regulate the sector anyway, should it wish to do so. It already has the power to regulate the rest of the residential mortgage market in a move that was designed to prevent the housing sector from overheating as demand is pushing prices ever higher. Banks must now ensure that no more than 15% of residential mortgages are given to people borrowing more than 4.5 times their income and are also required to ensure that borrowers can repay their loans even when interest rates rise. However, it was thought that until now these rules do not currently apply to buy to let mortgages which account for around a sixth of the home lending market. Indeed, Osborne confirmed that he took Carney’s views on the buy to let market ‘very seriously’, adding that one of the biggest challenges is managing credit booms and house price cycles. ‘We have given the FPC powerful tools to, for example, tighten mortgage standards if they feel there’s a credit bubble developing. The governor of the Bank and the FPC have asked for additional powers over buy to let mortgages which weren’t included and we have granted those powers so they have that tool as well,’ he told the committee. Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), said he is disappointed that the promised consultation does not seem to be happening. ‘The Government stated its intention earlier this year to hold a post-election consultation to assess the evidence for granting powers of direction over buy to let lending to the Financial Policy Committee (FPC),’ he pointed out. He explained that the Chancellor’s statement to the Treasury Select Committee suggests ‘stage of evidence-led policy making has been removed, and that the consultation may be limited to what those powers will be when, rather than if, they are granted’. ‘It seems somewhat ironic that this development comes just days after Mark Carney also spoke to the Select Committee about the need for a wider stock take of financial regulations. There is a common interest in ensuring we have a stable market for buy to let, and we feel this would be aided by an open debate about the case for additional FPC powers based on the strength of evidence,’ he added. He also pointed out that the FPC itself recently judged that there is ‘no immediate cause to take action… Taylor Scott International
Taylor Scott International, Taylor Scott
