Carney to Gain Control Over Borrowing by U.K. Landlordsby
Treasury consultation on the new tools closed this month
BOE stability officials publish statement on risks next week
Bank of England Governor Mark Carney is set to gain the ability to limit borrowing by investors in rental housing within months, increasing his power over the property market.
Testifying in Parliament on Thursday, Chancellor of the Exchequer George Osborne said he’ll probably grant the BOE so-called powers of direction over the buy-to-let market later this year. He said he’s responding to systemic risks in that area identified by the central bank’s Financial Policy Committee.
The 10-member FPC held its quarterly meeting in London on Wednesday and will publish a statement next week. It’s also due to release an assessment by the Prudential Regulation Authority of underwriting standards for buy-to-let borrowers. In December, the BOE said these borrowers are often subject to less stringent affordability tests than owner-occupiers, potentially leaving them more vulnerable to shocks.
The FPC recommended that it get tougher powers over the buy-to-let market in 2014, saying it would increase its ability to prevent a buildup of risks to the financial system. A U.K. Treasury consultation on the new tools -- covering loan-to-value and debt-to-income ratios -- closed earlier this month. The FPC has already got those for the owner-occupier segment and this would bring property investors into line.
“It’s very likely we will give powers to the FPC over the buy-to-let market,” Osborne told lawmakers at the Treasury Committee. “I just want to make it a more even playing field.”
Amid fears rental owners are pushing up house prices, Osborne has already lifted the stamp-duty tax paid by investors by three percentage points and cut tax breaks. U.K. gross mortgage lending rose 30 percent in February compared with a year earlier, according to the Council of Mortgage Lenders, with borrowing boosted by investment purchases before some of those changes take effect.