FPC ‘increasingly likely’ to get BTL powers

The Financial Policy Committee is “increasingly likely” to receive additional powers over the buy-to-let market after official figures show the sector is continuing to grow, according to Capital Economics.

Figures published last week by the Bank of England and FCA show buy-to-let lending grew by 18.5 per cent year-on-year from £7bn in the second quarter of 2014 to £8.3bn in Q2 2015.

As a result of its rapid growth, the buy-to-let sector has come under policymakers’ spotlight.

In July, the BoE warned that the buy-to-let market could put the financial stability of the UK at risk due to the relative ease with which borrowers could access credit.

The Treasury will consult later this year on whether to give the FPC the power to contain buy-to-let lending. The committee already has the power to cap LTIs and LTVs in the residential sector.

Capital Economics chief property economist Ed Stansfield says, since the MMR, lenders have shifted their activity from regulated owner-occupied lending to unregulated buy-to-let.

He adds that while buy-to-let’s share of total lending has fallen recently, this was largely “driven by strengthening regulated mortgage lending, not lenders pulling back from buy-to-let loans”.

He adds: “The FPC expressed concerns in July about the buy-to-let sector and its possible effects on financial stability. 

“With the size of the sector growing further, it looks increas-ingly likely that the FPC will receive additional powers over the sector when the Treasury consults on the issue later this year.”

Buy-to-let lending peaked at £45.7bn in 2007, although lending fell to just £8.6bn two years later. Since then, buy-to-let has made a strong recovery, growing by 218 per cent to £27.4bn in the five years to 2014. 

The sector is expected to reach £30bn this year.