FPC: ‘No immediate cause for action in B2L’


The Financial Policy Committee says there is “no immediate cause” to take action in the buy-to-let market.

However, the Bank of England committee says it is “alert” to the sector’s rapid growth and “potential developments in underwriting standards”.

Minutes from the FPC’s meeting this month say: “The FPC judges that there is, at present, no immediate case for action in the buy-to-let mortgage market.”

As a result of its rapid growth, the buy-to-let sector has come under policymakers’ spotlight. The share of buy-to-let in the stock of outstanding mortgage lending has risen to 16 per cent from 12 per cent in 2008 and the total stock has increased over 40 per cent in the past seven years.

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 later this year consult over whether to give the FPC the power to contain buy-to-let lending – potentially through limiting LTV or debt-to-income ratios – if the committee deems it necessary. The committee already has the power to cap LTIs and LTVs for owner-occupied lending.

The FPC adds: “The rapid growth of the market also underscores the importance of FPC powers of direction for use in future.  HM Treasury has said it will consult on powers of direction for the FPC related to buy-to-let lending later in 2015.”

Macro-prudential issues aside, the sector will also have to deal with the introduction of the Mortgage Credit Directive and the tax changes brought in by the Budget.

From 21 March 2016, so-called ‘consumer buy-to-let’ will be regulated, which the Treasury estimates this market to account for around 11 per cent of the overall market.

Further, as part of the summer Budget, George Osborne declared that the Government will begin tapering down tax relief for buy-to-let borrowers to the basic rate of tax, starting in April 2017.

The FPC’s declaration that the buy-to-let does not need to be interfered with at this time comes days after the Council of Mortgage Lenders warned policymakers about the “damaging” effects of excessive control of the sector.

Earlier this week, the trade body said: “Lenders do, of course, accept that regulatory authorities must have the right tools to address any macro-prudential risks. But we urge the government and other authorities to consider the effects of uncertainty on the market and, in particular, the potential for a series of reforms to have cumulative, unintended and perhaps damaging consequences.”