Buy to let mortgage borrowing will be regulated
Will the new regulations aide or hinder buy to let?
In new measurers aimed at protecting UK mortgage borrowers, the Treasury has set out its intention to regulate the buy-to-let lending market...
In new measurers aimed at protecting UK mortgage borrowers, the Treasury has set out its intention to regulate the buy-to-let lending market.
The move follows the Government’s analysis of the causes of the financial crisis, as set out in its Reforming Financial Markets paper published earlier this year.
The proposals include Financial Services Authority (FSA) protection for borrowers whose mortgages are sold on to third parties and the expansion of the FSA’s remit to include the regulation of buy-to-let and second-charge mortgages.
Exchequer Secretary, Sarah McCarthy-Fry, says: “We are determined to reform the system for the future, to offer both stronger protection for consumers and greater stability in the housing market.”
Buy-to-let loans have so far been excluded from regulation because they are seen as investment finance but recent research by mortgage broker, Exact, indicates that the majority of buy-to-let mortgage intermediaries are unhappy with the situation, given the high numbers of amateur landlords operating in the UK rental sector.
However, FSA intervention is unlikely to improve availability in an already severely contracted market; according to Paragon Mortgages, the number of buy-to-let products available has collapsed to around 190, with 94% of loans disappearing since the onset of the credit crisis.
Commenting on the latest developments, a director of lettings portal lettingsearch.co.uk, Phil Calderbank, says: “Mortgage regulation is generally beneficial for consumers, and I would welcome any initiative intended to protect landlords against the risk of falling into arrears or repossession.”
He adds: “However, buy-to-let lending criteria are already tight and it is not entirely clear what the Treasury is hoping to achieve by increasing the FSA powers over this sector.”
The Treasury’s consultation period closes on 15th February 2010 after which changes will be included in the new Financial Services Bill.
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