The Financial Policy Committee of the Bank of England has once again requested powers to regulate BTL lending.
Commenting upon their September Report FPC member Richard Sharp said:-
“One risk which has received a lot of publicity following the publication of the September Report was the UK housing market. It is worth observing how secure the UK housing market has been to investors historically. This can be partly attributed to the fact that mortgages are typically well backed by housing assets, and that in the UK, unlike the US, mortgages are recourse loans, so homeowners can’t just walk away from their debts. However, the rapid growth in the buy to let market has caught our attention – the stock of buy to let mortgages has increased by over 40% since 2008. Why could this be a cause for concern? Buy to let mortgages are typically extended on interest-only terms, meaning their loan to value levels fall more slowly over time than owner-occupied mortgages. In addition buy to let mortgages can add to procyclicality in the housing and credit markets, as investors may increase demand for property in an upturn, as they seek capital gains. Buy to let investors may increase selling pressure in a downturn, if their rental incomes fall below their interest payments or if they observe or anticipate falling property prices.”