Government launches consultation on BTL regulations

The Government has today launched its promised consultation on the jurisdictions that the Bank of England’s Financial Policy Committee should be allowed to implicate over the buy to let market.

This has been implemented in order to ascertain information on how the operation of the nations buy-to-let mortgage market could represent a risk to financial stability.

Targeted

Aimed primarily at individuals, institutions and associated bodies that could potentially be affected by the FPC’s powers of direction, the Government said it also would appreciate the views of other parties with an interest in housing market policies.

After the consultation has taken place, the Government has pledged to continue to examine the responses and utilise them accordingly to devise their instrument to place powers in legislation.

The Government believes that the Bank of England should have more powers to restrain the buy-to-let market if required. This could include directing regulators to permit lenders to put limits on their buy-to-let output.

In addition, the amount that buy-to-let investors could borrow or LTV could be altered and the Bank could also change the required ratio of perceived rental income to mortgage interest payments.

At present, lenders are not currently supportive of more controls for the market and warn that it does not necessarily need more regulations.

Changes

There have been calls for upcoming changes to the market, such as the 3% stamp duty charge from April, to take effect before any additional regulations are made. The Council of Mortgage Lenders director general Paul Smee said, ‘we understand the rationale for putting the macro prudential tools at the Bank of England’s disposal, but also recognise that this does not necessarily mean they will be used. In our view, buy to let does not constitute a market that currently requires further macro prudential intervention, especially as the effect of several recent tax changes is yet to be fully felt and evaluated.’[1]

‘We urge policymakers to be mindful of the risk of unintended consequences that could adversely affect the private rented sector, alongside their focus on ensuring that the buy-to-let market does not pose a threat to financial stability, ‘ he added.[1]

Government launches consultation on BTL regulations

Confusion

Peter Williams, director of the Intermediary Mortgage Lenders Association, said that the industry could be confused by what the Government is trying to implement.

Williams said, ‘in the Autumn the Chancellor, in giving evidence to the Treasury Select Committee, appeared to state unequivocally that the power to place limits on place limits on buy to let mortgage lending was to be granted without the previously advertised consultation having taken place as to whether new powers were justified at all.’[1]

‘Recently the Governor of the Bank of England also appeared to suggest that he was preparing to exercise such powers,’ he continued. ‘Now the consultation on what those powers might be has finally materialised, there is much that should be discussed and challenged.’[1]

‘The points advanced in support of further regulation do not appear to be well supported by evidence. At the same time there is considerable work required on the part of lenders and trade bodies to bring together a detailed response, and we should be reassured that this will not be a waste of time if the consultation is simply to rubber stamp a decision already made behind the scenes,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-buy-let-regulation-2015123111379.html