Regulating buy-to-let sector is pointless, says CML

Lending Strategy March 2010

The Council of Mortgage Lenders has hit out at Treasury plans to regulate the buy-to-let sector, arguing that this will not lead to increased consumer protection.

In its formal response to the Treasury’s consultation paper on extending the scope of mortgage regulation to buy-to-let the trade body argues that such a move would capture an inappropriate range of commercial transactions.

The CML also says this would be the wrong way to address concerns about systemic market risks, which it maintains would be more appropriately tackled through prudential rather than conduct of business regulation.

The CML says: “Fundamentally, we still believe buy-to-let loans are essentially commercial transactions with an investment dimension so they should not be subject to retail mortgage regulation.

“Inappropriate regulation could further damage buy-to-let lending which has shrunk substantially in the past two years, at a time when the government is separately promoting investment opportunities in the private rented sector.”

It adds: “Extending the Financial Services Authority’s scope as proposed would undermine the government’s wider housing policy.”

Michael Coogan, director-general of the trade body, says: “While we support some proposals to extend regulation the Treasury and the FSA should tread carefully to avoid unintended consequences.

“As far as buy-to-let is concerned the proposals are barking up the wrong tree. For amateur property investors poor advice is the issue rather than the mortgage.”

He adds: “The Treasury recognises that regulation has in the past dampened incentives to invest in the private rented sector. Proposals to extend regulations designed to protect home owners to the buy-to-let sector would simply repeat this mistake.”