Bank Of England Set For New Buy-To-Let Powers
03-26-2016
George Osborne says it is "highly likely" the Bank will be given powers over the buy-to-let mortgage market "later this year".
The Bank of England seems set to be given greater powers over the buy-to-let market, after the Chancellor expressed concern about the housing "bubble".
A consultation was launched late last year after the Financial Policy Committee, which is part of the Bank of England, recommended it should be granted the power to direct regulators to require lenders to restrict buy-to-let loans.
The powers included allowing the FPC to cap the maximum loan-to-value ratio (the size of the loan relative to the value of the property), as well as the costs of debt servicing relative to rents.
The FPC, whose role is to identify and head-off possible risks to the financial system, has had similar powers over residential mortgages since April last year.
George Osborne told the Treasury Select Committee on Thursday that it was "highly likely" the FPC would be given the powers over the buy-to-let mortgage market "later this year".
He said: "The Bank of England and the Financial Policy Committee have identified potential systemic risks in the large increase in the buy-to-let market.
"The measures I have taken in the last couple of fiscal events - on additional stamp duty, on changes to mortgage interest relief - have been done in the knowledge the Bank of England has concerns about a bubble emerging in this market.
"It is highly likely we will give the FPC powers over the buy-to-let market. It is possible we can do that later this year."
The Chancellor used the Budget to impose a 3% hike in stamp duty on additional properties, with moves also announced to curb tax relief on buy-to-let mortgage interest.
The news came as the British Bankers' Association reported that £13.2bn of mortgage borrowing was approved in February - lower than in January but 33% higher than at the same time last year.
The number of mortgage approvals in February was also 26% higher than a year ago.
The BBA's chief economist Richard Woolhouse said: "It appears that borrowers are continuing to try to get ahead of the increases in stamp duty for buy-to-let and second home buyers scheduled to come into effect next month."