UK Treasury to consult on handing buy-to-let powers to BoE

Added 14th December 2015

The Treasury is expected to launch a consultation this week aimed at handing increased oversight of the UK’s buy-to-let mortgage market to the Bank of England (BoE).

UK Treasury to consult on handing buy-to-let powers to BoE

During his joint Autumn Statement and Spending Review, chancellor George Osborne announced that he would launch a consultation before the end of 2015 on giving the BoE’s Financial Policy Committee (FPC) more influence over the country’s buy-to-let market.

While the committee has substantial control over owner-occupier lending; their influence does not yet extend to the buy-to-let sector.

Extended remit

The FPC has called on the Treasury to extend its oversight and enable it to place limits on the sector; such as loan-to-value ratios, debt-to-income ratios, and interest coverage ratios.

Following recommendations from the committee last year; banks must now ensure that no more than 15% of residential mortgages are given to people borrowing more than 4.5 times their income.  

These rules, however, do not yet include the buy-to-let market.

Buy-to-let growth

The BoE’s Financial Stability Report, released earlier this month, identified the buy-to-let mortgage sector as having potential implications for the UK’s financial stability.

Since 2008, lending for buy-to-let mortgages has grown by 5.9% per annum on average, compared with only 0.3% for owner-occupiers properties.

New loans to buy-to-let investors are often subject to less stringent affordability tests than loans to owner-occupiers. 

 

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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