Brokers have criticised Chancellor George Osborne's hint that the Bank of England will be given new powers to regulate the buy-to-let mortgage market.
Last week, Mr Osborne let slip to the Treasury Select Committee that the Bank's Financial Policy Committee (FPC) would receive new powers to limit the size of mortgages relative to rental payments.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), said the Government had previously announced a post-election consultation to assess the proposals.
“It was therefore very disappointing to hear the Chancellor apparently jump the gun at the Select Committee.
“It suggests a stage of evidence-led policy making has been removed, and that the consultation may be limited to what those powers will be when – rather than if – they are granted.”
Williams said there is a common interest in ensuring a stable buy-to-let market which would be aided by an open debate based on evidence.
He said the FPC itself recently judged was that there is ‘no immediate cause to take action in the buy-to-let market’.
“Clearly there is a distinction between having powers and using them, but creating an evidence base to inform future FPC decisions is important and this process should continue.
“We must also hope the potential bias-towards-action does not exclude a sober appraisal of the facts even though the Chancellor seems to have jumped that hurdle.”
Martin Wilkinson, founder of buy-to-let search portal Buy2Let.com, said loans to landlords are far less risky than traditional owner-occupier mortgages as they are on a far lower average LTV, and typically have at least 125% rent cover on the repayments.
“This is in addition to the borrower having independent income to cover the repayments in the event of an enforced void.”
Wilkinson said that 70% of the buy-to-let market is cash, so these new powers will only affect a small proportion of the overall market."