The Intermediary Mortgage Lenders Association has warned the Bank of England not to “rush to judgement” on buy-to-let after the central bank revealed it was concerned by the sector’s rapid growth.
In last week’s Financial Stability Report, the Bank warned the sector could pose a threat to the UK economy due to looser lending standards than owner-occupied loans and because a higher proportion buy-to-let loans are on interest-only.
But Imla has hit back, arguing that while the sector has experienced significant growth over the past few years, lending is still way below pre-crisis levels.
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.
Imla director John Heron says: “The Bank of England’s comments on buy-to-let are based on their observation of strong growth in lending in recent years. It should be understood, however, that while there has been substantial growth, this has been from a low base post-crisis and lending today is still no greater than it was 10 years ago and is well below the levels achieved before the crisis in 2007.
“The rising cost of homeownership is among many factors driving demand for rental properties, including the fall in social housing, changing work patterns, growing numbers of students, high levels of immigration, later marriage and rising separation rates.
”Housing needs are changing and, in fact, IMLA analysis shows fewer than one in three extra properties to enter the private rental sector since 2007 have been backed by a buy-to-let mortgage. Lending has therefore been responding to rather than leading demand.”
Heron also says there has been no evidence of a “glut of new buy-to-let” investors as a result of pension freedoms.
He adds: “The size of the average pension pot and the tax implications of withdrawing large sums required for investment are likely to mean that any impact remains at the margins.
“We look forward to an open and frank debate on buy-to-let growth but strongly urge against a rush to judgement.”