Bank of England to get powers to limit buy to let mortgages

The government is reviewing whether to give the Bank of England new powers to restrict lending in the buy to let market

The government has already given the Bank of England powers to limit mortgage lending for lenders in the residential market last April 2015 where. Currently this limit states no more than 15% of lenders loans can go to high risk residential borrowers i.e. those borrowing 4.5 times their income.

The governor of the Bank of England, Mark Carney, has expressed concerns about the buy to let market. He stated he was worried that if house prices began to fall, investors might sell in large numbers, which could destabilise the economy.

The Treasury has now suggested that similar restriction are to be implemented with Landlords and buy to let investors. This could be in relation to a property value or if the rental income covers the mortgage interest.

The Council of Mortgage Lenders (CML) has predicted buy to let mortgages will slow 22% by 2017. In 2015 116,000 buy to let mortgages where completed with 105,000 expected in 2016 and 90,000 next year.

With landlords facing an extra 3% in stamp duty from April 2016 and tax relief on profits being lowered many landlords will feel the squeeze.

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Written by: Houseladder