In a surprise announcement, the Chancellor indicated that he is planning to give tough new powers to the Bank of England to regulate buy-to-let mortgages.
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The Bank, which is led by Mark Carney, has warned that the buy-to-let mortgage market poses a threat to Britain’s economic recovery. However, Osborne had claimed that more consultation was needed before any change was made.
A finance ministry source said the details of the new powers remained subject to a consultation that was due to start before the end of the year.
Back in June 2014, he announced the Bank of England would be able limit loan-to-value and debt-to-income ratios on standard markets, At the time, the Chancellor said the Government meant to consult on buy-to-let lending later in 2015, with a “view to building an in-depth evidence base on how the operation of the United Kingdom buy-to-let housing market may carry risks to financial stability”.
Speaking in front of the Treasury select committee yesterday, Osborne confirmed he had taken the decision to grant the committee powers over the sector but go into specifics about the devices available to it. It argued buy-to-let borrowers are “potentially more vulnerable” to any interest rate rises as they have interest-only mortgages. “Obviously I am in conversation with the chairman of the FCA”, Mr Osborne continued.
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Osborne told a parliamentary committee: ‘The governor of the Bank and the FPC (Financial Policy Committee) have asked for additional powers over buy-to-let mortgages … and we have granted those powers’. “We have granted those powers so that they have that tool as well”.
