BTL regulation could force lenders to exit market, warns BSA

The Building Societies Association has warned that government plans to regulate buy-to-let mortgages could force more lenders to pull from the market.

In its response to the Treasury’s consultation it argues that the new proposals fail to reflect the investment decisions that buy-to-let borrowers make.

Paul Broadhead, head of mortgage policy at the BSA, says subjecting buy-to-let investors to affordability and suitability assessments in the same way as owner occupiers is not appropriate, and would result in a further constraint in the supply of quality housing to the private rental sector.

He says: “The decision to enter into the buy-to-let market is an investment decision made by the borrower. Including buy-to-let mortgages in the same regime as owner occupied mortgages would not be practical.”

The government also proposes to explore extending FSA regulation to second charge lending and looks at how borrowers can be protected when mortgages are sold on.

The BSA supports this move.

Broadhead, says: “We support the principle of the regulation of second charge mortgages being transferred to the FSA. This will importantly make a single regulator responsible for both first and second charge mortgages.

“That said there will be practical difficulties particularly with regards to the transitional arrangements therefore it is important these are constructed to protect existing borrowers and lenders, as responsibility is transferred from the OFT to the FSA.

“We also agree that firms who buy mortgage books should be regulated. It is unfair that consumers who find their mortgage is sold on by their lender are exempted from the benefits of regulatory protection that other customers receive.”