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Basel Committee joins assault on buy-to-let

Buy-to-let is in the line of fire again with reports that officials at the Basel Committee are looking to get tough on the sector.

Mortgage experts have already warned that Chancellor George Osborne's buy-to-let tax crackdown could destroy the market.

The Bank of England is also taking aim at the sector, calling for new powers over the interest coverage ratio in buy-to-let calculations.


The Basel Committee, which sets global financial standards, wants banks to hold twice as much capital against mortgages when repayments are dependent on income from tenants, according to a report in The Daily Telegraph.

It is concerned that landlords may struggle to meet their repayments if they cannot find tenants for their properties.

This could double the amount of capital lenders must hold against the loan from 35% to 70%, forcing up the cost of buy-to-let mortgages and reducing supply.

The Financial Policy Committee at the Bank of England, headed by Mark Carney, warned this week that buy-to-let mortgages are twice as likely to turn bad as loans taken out by owner-occupiers.

The FPC has asked the Treasury for powers to limit lending to landlords, which could include restrictions on loan-to-value and loan-to-income ratios.

The buy-to-let market is still growing strongly although activity fell by 4% in November, according to latest research from Connells Survey & Valuation.

John Bagshaw at Connells said buy-to-let remains an attractive proposition for property investors.

“Much of the energy is being fuelled by a desire to out-maneouvre the Treasury’s attempts to take more money from buy-to-let business.

“With the Chancellor imposing more fees and regulations on landlords in his most recent Autumn Statement, many would-be landlords are hurrying to get into the market before these changes kick in from April next year.”


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