Bank Of England Set For New Buy-To-Let Powers

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. Read more on the Sky News website.

Buy-To-Let: A Happy New Year For Landlords?

New survey data from YouGov points to considerable financial resilience on the part of buy-to-let landlords as they face the prospect of future rises in interest rates. The findings may bring some new year solace to the sector, which faced a challenging end to 2015.  In the final weeks of the year, the IMF added its voice to those favouring controls over buy-to-let lending, the Bank of England governor Mark Carney reiterated his concerns about activity in the sector, and HM Treasury published a consultation on powers of direction for the Financial Policy Committee (FPC) in the buy-to-let market. The writing has been on the wall for some time and may partly explain a recent Residential Landlords Association survey showing that 10% of landlords plan to leave the market over the next five years. Read more on the CML website.

Bank Capital Push Could Hamper Help to Buy

The Government’s flagship Help to Buy scheme risks being derailed by recommendations from regulators for banks to hold more capital against home loans.  Senior banking analysts and industry executives have warned that the Bank of England’s push to get lenders to increase the risk weightings on their mortgage books could dent the impact of George Osborne’s scheme to stimulate the housing market. The fears follow the Bank of England’s Financial Policy Committee (FPC) announcement that the authorities had for the first time applied a “risk weight floor” on UK mortgages. A minimum risk weight on mortgages would likely mean banks being forced to hold more capital against their home loan portfolios at the very time the Help to Buy scheme is attempting to make mortgage borrowing more attractive to lenders. “This could effectively kill the scheme before it has even been launched — Osborne must be furious,” said one senior banks analyst. Read more on the Daily Telegraph website.