FPC ‘increasingly likely’ to get powers over B2L as sector grows

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, says Capital Economics.

Figures published today by the Bank of England and FCA show buy-to-let lending grew 18.5 per cent 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 the buy-to-let market could put the financial stability of the UK at risk due to the relative ease with which borrowers can access credit.

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

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 says: “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 increasingly 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.