Home Stock & SharesBanks Bank of England set to clamp down on buy-to-let lending

Bank of England set to clamp down on buy-to-let lending

by Jonathan Adams

Mortgage report to assess ways to rein in booming landlord lending market amid fears over new UK property crash

The Bank of England is expected to signal a clampdown on buy-to-let lending when it reports on the mortgage market for landlords.

The Bank has been watching the buy-to-let market for some time and is concerned about the amount of money pumped into the market and its vulnerability to even a small rise in borrowing costs.

Threadneedle Street’s regulatory arm, the Prudential Regulation Authority, will on Tuesday publish a report on underwriting standards for buy-to-let mortgage lenders alongside scenarios for testing the financial strength of Britain’s banks.

The Bank is concerned that lenders have relaxed standards for landlords, creating conditions for a property crash. Potential measures to rein in the market include limiting the percentage of buy-to-let mortgages for each lender, tightening the terms of such mortgages or forcing lenders to use more capital for the loans.

The buy-to-let market has made a big comeback in recent years with interest rates at all-time lows, making borrowing cheap and offering little return for people with money in the bank.

The chancellor’s stamp duty surcharge on second-home purchases, designed to cool the market, has prompted a short-term frenzy of buying before the 1 April deadline, further pushing up house prices. George Osborne said last week he was ready to give the Bank’s financial policy committee further scope to restrict buy-to-let lending.

Osborne told the Treasury committee, “The Bank of England and the financial policy committee have identified potential systemic risks in the large increase in the buy-to-let 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”.

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