Imla urges calm ahead of Mortgage Credit Directive
The mortgage market needs a period of calm to prepare for the Mortgage Credit Directive, and should not even consider more controls on residential borrowing, Charles Haresnape has said.
Responding to the possibility of controls on buy-to-let lending, highlighted in the Bank of England’s 64-page Financial Stability report, the chairman of the Intermediary Mortgage Lenders Association said the prospect of consultation on BTL lending controls was a great concern.
“There are major doubts over the case for additional powers in this part of the market. Lending growth has been in line with the expanding private rental sector, and lenders have taken a responsible approach by tightening their criteria rather than relaxing standards,” he said.
Later this year the Treasury is set to consult on giving the Financial Policy Committee the power of direction to limit residential mortgage lending at high loan-to-value or high debt-to-income ratios, including interest coverage ratios, for buy-to-let lending.
Parliament gave the equivalent powers to the FPC for owner-occupied lending in April, and the FPC has been monitoring conditions in property markets because of concerns over the levels of high household indebtedness.
Mr Haresnape said the FPC’s approach was clearly geared towards avoiding a crisis scenario.
He added: “We are operating in a new era of mortgage market regulation, where action will be taken long before an imminent threat to stability emerges. It is vital that markets are not supressed too heavily by regulators’ bias towards action.”
A CML spokesman said: “The forthcoming consultation on tools for the FPC related to buy-to-let lending will need to be open and evidence-based, and not start from an underlying presumption in favour of intervention. BTL still only represents a modest share of the overall mortgage market; its potential impact on overall financial stability should not be overstated.”
| Key findings |
In part, recent movements in household indebtedness reflect the slowdown in the housing market during 2014. Annualised house price growth moderated to 3 per cent in the last quarter of 2014, from 10 per cent in the second quarter of 2014. Buy-to-let mortgage lending accounts for 15 per cent of the stock of outstanding mortgages. BTL lending was 20 per cent of the flow in the first quarter of this year. Source: BoE |
Adviser view
Dominic Basilea, director of Hertfordshire-based Aqua Wealth Management, said: “The sector is too heavily regulated. It is good for the client and for advisers, but it is the client who pays for it in the end. It is the estate agents that need regulating.
“Control on BTL borrowing is not necessarily needed. If you do it, most would not qualify. If another crash came, as long as lending is as it has been in the past five years, then people could afford it.”
