Lively debate will follow on buy-to-let

John Heron

The private rented sector has been making the news recently, and it is a sector where there could be some exciting developments in the next few years.

Recently, the Government published a review of this market carried out by Sir Adrian Montague which includes recommendations designed to make it easier to build-to-let and to encourage large institutions to invest in the sector.

It is too early to say what the impact of this might be for individual buy-to-let landlords but its existence could have an impact on the number and type of properties being buil and could have funding implications too.

Housing minister Grant Shapps admitted that in the past, PRS often been seen as the Cinderella of the housing market but acknowledged that when over three million people rely on this sector for their home, this is clearly no longer the case.

Crucially, he added that the Government is aware that it needs to avoid excessive regulation that would force up rents and reduce choice for tenants.

With buy-to-let likely to represent a growing and important sector in the mortgage market, it is inevitable that the debate about the regulation of buy-to-let mortgages will be a lively one.

There are ongoing concerns that the product is being “gamed” to provide an outlet for those whose homeownership ambitions are being constrained by credit controls and COB regulation in the owner-occupied sector. There are also concerns that some lenders do not fully understand the risk a landlord is exposed to because the lender is only underwriting the property on the application and is not looking at the borrower’s wider exposure to the property market.

The re-emergence of products with very low affordability hurdles has also got to be a worry for a regulator looking in at this market. Whatever the outcome may be on regulation, we need to ensure responsible lending and borrowing practices in our market and lenders and intermediaries need to work closely together to achieve this.