Buy to let mortgage market must be regulated, says BPF
Buy-to-let mortgages must be regulated by the financial watchdog to prevent the reckless lending seen in the housing boom being repeated...
The British Property Federation, an industry body, has urged the Financial Services Authority to regulate all buy-to-let mortgages and property investment clubs.
It says during the boom years lenders threw money at buy-to-let investors, many of whom have now been left seriously out of pocket, especially those encouraged into buying new build flats.
In a tough report on the buy-to-let market, the BPF says a 'black hole of irresponsible lending; has damaged both the housing sector's reputation and the ability of banks to lend money.
It says the current situation where buy-to-let mortgages are simply treated like business loans but almost every other mortgage, from typical loans to equity release, is regulated is wrong.
And the BPF argues that regulating buy-to-let lending would put the market on a sounder footing and protect tenants against eviction if landlords fall into financial difficulty.
Ian Fletcher, BPF director of policy, said: 'Many lenders simply threw money at buy-to-let borrowers during the boom without sufficient checks on who they were lending to or what they were lending for.
'Consumers have suffered as their buy-to-let dream turned sour and many buy-to-let lenders were at the root of our economic problems as organisations such as Bradford and Bingley found themselves over exposed to bad loans.'
Problems in the buy-to-let market caused by irresponsible lending have been exacerbated by the drying up of mortgage supply as the credit crunch and banking crisis unfolded.
Two years after the collapse of Northern Rock and a year on from the rescue of Bradford & Bingley, the availability of buy-to-let mortgages remains severely restricted.
Paragon, a buy-to-let specialist, reported last month that there were just 196 buy-to-let mortgages available at the end of August – a colossal 94.4% down on August 2007 and a slip from the 218 available in May.
The BPF is an industry body with members drawn from property developers and owners, to fund managers, investment banks and professional organisations. The report is backed by one of the UK's leading estate agents and property consultancies Savills.
Mark Harris, director at Savills Private Finance, said: 'The buy-to-let market has borne the brunt of the credit crunch and with a dearth of suitable finance available for professional landlords, we could well see an increase in repossessions.
'It's vital therefore that measures are in place to ensure the private rental market can continue to expand. Better regulation is therefore needed if we are to move from an age of recklessness into a period of responsibility.'
Source - This is Money