Chancellor George Osborne has revealed that the Bank of England (BoE) could soon receive powers to regulate the mortgages that small landlords use to buy investment properties.
The Treasury is currently discussing whether to give the BoE the powers it has requested to limit the size of mortgages relative to rental payments. However, it has not announced whether the powers will be granted.
Questioned over the rumours, Osborne responded: “I’d better wait until we actually make the announcement, but [this will be] as soon as possible.”1
Mortgage experts have expressed concern over the plans to intervene in the sector.
Executive Director of the Intermediary Mortgage Lenders Association (IMLA), Peter Williams, says: “The Government stated its intention earlier this year to hold a post-election consultation to assess the evidence for granting powers of direction over buy-to-let lending to the Financial Policy Committee [FPC]. It was therefore very disappointing to hear the Chancellor apparently jump the gun at yesterday’s Treasury Select Committee.
“It suggests a stage of evidence-led policy making has been removed and that the consultation may be limited to what those powers will be when, rather than if, they are granted.”2
Individual mortgage lenders also addressed the announcement.
Managing Director of Aldermore Group, Charles Haresnape, explains that the lender welcomes any policy that improves the private rental sector, but insists it is important that any powers granted do not threaten the market.
“The private rented sector is a vital component of the UK housing market and policy levers must be used to support the sector in driving additional capacity,” he says. “It is important that the FPC works closely with the sector and uses any powers sparingly and appropriately, and not unnecessarily remove any momentum from the private rented market.”2
Steve Griffiths, Head of Sales and Distribution at Kensington Mortgages, states that it will be interesting to see what powers the BoE is given when further details are announced later this year: “The rental sector is becoming increasingly important to the UK housing market and many people are staying in rented accommodation for much longer than we have seen historically.
“The quality and variety of such accommodation has improved significantly following the growth of buy-to-let, and it is vital that these standards are maintained in the future. It would be short-sighted to limit landlords’ ability to deliver quality rented accommodation when many people rely on this sector.”2