Treasury is considering giving more powers to Bank of England over the buy-to-let market

Lauren Fedor
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The facade of the headquarters of the Ba
The Bank of England's financial policy committee wants to be able to direct regulators to limit buy-to-let mortgages (Source: Getty)

The Treasury is looking for feedback on giving the Bank of England more powers to control the housing market.

Treasury officials announced today that they have opened a new consultation on the powers the Bank should have over the UK buy-to-let mortgage market in particular.

The Bank's financial policy committee (FPC) is responsible for identifying, monitoring and reducing systemic risks in the financial system and wider economy.

Right now, the Bank can intervene in the residential property market, but can only issue recommendations about the buy-to-let market.

The FPC said last year that it wanted additional powers of direction over buy-to-let, including the ability to direct the regulators to require lenders to place limits on loan-to-value ratios (LTV) or interest coverage ratios (ICRs).

"The government is aware of the difference between buy-to-let lending and owner-occupier lending and wants to ensure that any action taken in the buy-to-let market is proportionate, does not place excessive costs on business, and does not unduly restrict business activity," the Treasury said in today's announcement.

"The consultation offers respondents the chance to comment on how the operation of the UK’s buy-to-let mortgage market may carry risks to financial stability and on new powers of direction for the independent Bank of England regarding buy-to-let mortgages."

The consultation will close in March of next year, with a government response expected sometime around the spring Budget.

The Residential Landlords Association (RLA) has already responded, saying the Treasury's consultation "risks choking off the supply of new housing".

“There is no clear evidence that the property boom is caused by buy-to-let investors, when rising prices are mainly concentrated in London and the South East. This is largely fuelled by foreign investors and speculators treating our property as a commodity," said RLA chairman Alan Ward.

"The Residential Landlords Association supports the principle of the Bank of England ensuring that lending does not pose a risk to the stability of the financial sector. It is important that lenders do not saddle landlords with debts which they cannot pay back. But landlord investment is essential to the supply of homes to rent.

"The overwhelming majority of landlords are responsible borrowers providing homes as a long-term business."

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