Could Buy to Let Mortgages Soon Be Subjected to Further Controls?

Thats the question being asked at the moment, as rumours of a possible intervention in the market have come to light. Sky News reported on the possibility of the Financial Conduct Authority (FCA) looking to assess the standards by which smaller lenders are providing buy-to-let mortgages. The Bank of England currently oversees lending conducted by the major UK banks and building societies. However, smaller lenders do not fall under these regulations. In reality, a firm that does not fall under the auspices of the lending rules does not have to adhere to them. This could potentially mean such a firm would be more daring in lending to people who may not be accepted by the big-name lenders. How is the FCA involved? Some companies are regulated by the Financial Conduct Authority as opposed to the Bank of England. This means any curbs on lending that have been brought into play by the Bank of England do not apply to these other companies. However, it looks as though this disparity may soon be resolved if the rumours turn out to be correct. If the FCA does intervene, it may look into the quality of underwriting in place for buy-to-let loans granted by these smaller companies. If it does not meet with approval, it could lead to changes and tighter regulations in this area of the market. The state of the economy Many things have the power to affect the economy. However, some fear that buy-to-let lending may pose a possible risk to the stability of the economy especially since the Brexit vote. If this is so, there could be a chance of the economy suffering purely because some firms may not have measures that are as stringent as the major lenders have to put in place. Of course, nothing is set in stone yet and we do not know for sure whether the report is correct. However, many outlets have reported on the likelihood of this happening, and we must wait and see whether it comes to fruition. No one from the FCA has made any comment as yet. However, since major lenders are expected to put the brakes on buy-to-let lending, it would seem likely the same could happen with reference to other lenders in this marketplace as well. There have been several changes in this area of the market in recent times. Changes to the tax position and also to the willingness of many lenders to grant buy-to-let mortgages have made things difficult. Tax relief is also set to go in the near future. Landlords will no doubt be watching to see whether there is a chance of the rules being tightened by smaller lenders alongside the bigger ones. An uncertain future Some landlords have already given up some of their properties owing to the changes that have been made. Others may still do the same, depending on whether or not these new changes do come into effect. We shall be watching.

Published on 14 August 2016

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