If you're buying a rental home in the U.K. you're making the Bank of England nervous.
Governor Mark Carney and his colleagues have repeatedly said a surge in buy-to-let property investment may pose a risk to financial stability. With the central bank's Financial Policy Committee grappling with that question, it's trying to get extra powers to intervene in the market. A U.K. Treasury consultation on new tools for the institution closes on Friday.
Policy makers are worried because almost seven years of record-low benchmark borrowing costs and measly savings rates have bolstered appetite for property. At the end of last year, mortgages taken out by investors were rising more than twice as fast those for owner occupiers and now the totals are creeping toward pre-recession levels.
Against that backdrop, the FPC wants powers to curb loan-to-value ratios and interest-coverage ratios in the buy-to-let market. It's already got those for the owner-occupier segment and this would bring property investors into line.
Carney will lead a meeting of the FPC on March 23, and while it won't have these powers by then, buy-to-let will probably feature in their discussions.
BOE Deputy Governor for Financial Stability Jon Cunliffe, a member of the committee, said this month that housing risks are increasing. He also singled out buy-to-let lending as a potential threat on the grounds that any downturn in the market could be amplified if it all investors wanted to sell at the same time.
"There could be risks to financial stability if it starts a spiral downward. We don’t have much experience of a stock of buy-to-let mortgage investors of this size."