Osborne warns of new crackdown on buy-to-let mortgages: Bank of England 'highly likely' to get new powers to stop market overheating
03-26-2016
- Bank of England ‘highly likely’ to get powers to curb buy-to-let mortgages
- Action to be taken over mounting concern housing market is overheating
- Buy-to-let properties favoured by many because of low returns on savings
For the latest on George Osborne visit
By Jason Groves - Deputy Political Editor, Daily Mail
The buy-to-let market faces a fresh crackdown within months, George Osborne warned yesterday.
The Chancellor said the Bank of England was ‘highly likely’ to get new powers to curb the availability of buy-to-let mortgages amid mounting concern the market is overheating.
Thousands have poured their savings into buy-to-let properties because of low returns on savings and pensions.
But regulators fear some may be taking on too much debt and creating an artificial spike in property prices.
The Treasury is already planning a punitive hike in the stamp duty charged on second homes and buy-to-let properties.
But Mr Osborne told the Commons Treasury committee that further measures were also now planned.
The Chancellor said the Bank of England was ‘highly likely’ to get new powers to curb the availability of buy-to-let mortgages amid mounting concern the market is overheating
A consultation was launched by ministers last year after the Bank’s Financial Policy Committee (FPC), whose role is to identify and head off possible risks to the financial system, requested the power to order regulators to require lenders to place restrictions on buy-to-let loans.
Mr Osborne told MPs yesterday he was minded to grant the request, adding: ‘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 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.
‘So in that sense, I am not saying there has been any collaboration – because they are entirely independent – but I have informed the Bank’s governor in advance of steps I have decided to take in this space, so I think we have a coherent approach to that.’
George Osborne: 'A budget that puts the next generation first'
The FPC has requested powers to direct regulators to require limits on buy-to-let lending. These limits could apply to lending in terms of loan-to-value ratios or interest coverage ratios (ICRs). A buy-to-let mortgage’s ICR is the ratio of the expected rental income from the buy-to-let property to the expected mortgage interest payments.
The FPC already has similar powers to limit mortgage availability in the residential property market if it detects signs of overheating.
From April 1, those buying a second home will pay three percentage points above current stamp duty rates.
Mr Osborne has also previously announced measures to curb tax relief on buy-to-let mortgage interest.
A consultation was launched by ministers last year after the Bank’s Financial Policy Committee (FPC), whose role is to identify and head off possible risks to the financial system
The British Bankers’ Association yesterday said 79,428 mortgages were approved for house purchase in February – a 20 per cent increase on the same month last year. Experts put it down to a surge in buy-to-let lending ahead of next week’s tax rise.
Anyone buying a £200,000 buy-to-let property before April pays stamp duty of £1,500. This is based on paying 0 per cent on the first £125,000 of the property value and 2 per cent on the portion above that level.
But from April, landlords will have to pay 3 per cent for the first £125,000 and 5 per cent on the rest.