The Bank of England has been given additional powers by the government to control mortgage lending for buy to let investors.
The BoE announced yesterday evening that from early 2017 its Financial Policy Committee will be able to regulate loan to value ratios granted by lenders to borrowers.
The new controls were widely expected; exactly how they will be executed is expected to be set out in a more detailed statement from the government in the coming days.
The FPC recommended in 2014 that it be given additional powers of direction over both the residential mortgage lending market and the buy to let mortgage market.
In March the FPC indicated that it intended to reduce the number of new buy to let mortgages by up to 20 per cent by the end of 2018 through a range of measures including lenders being obliged to consider landlord costs associated with letting properties, including tax, and verifying incomes if earnings were to be used to support a loan.
“It is crucial that Britain’s independent regulators have the tools they need to keep our financial system as safe as possible” says Phillip Hammond, the Chancellor.
“Expanding the number of tools at the Financial Policy Committee’s disposal will ensure that the buy to let sector can continue to make an important contribution to our economy, while allowing the regulator to address any potential risks to financial stability” he adds.
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