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.
