The Prudential Regulation Authority has published a consultation on proposals regarding the minimum standards firms should meet when underwriting buy-to-let contracts.
The Bank of England’s regulatory arm stated that these proposals also include clarification regarding the application of the small and medium enterprises (SME) supporting factor on buy-to-let mortgages.
The PRA is aiming “to prevent a marked loosening in buy-to-let underwriting standards and curtail inappropriate lending, and the potential for excessive credit losses” along with enhancing the transparency and consistency of its regulatory approach.
The supervisory statement follows a PRA review of underwriting standards in the buy-to-let sector that covered 31 firms – around 92 per cent of the market – which highlighted concerns about lenders’ growth plans and how they might meet them.
In particular, it found a risk that firms relax underwriting standards, so affect their safety and soundness, which suggests a need for macroprudential regulation.
The consultation will close on 29 June.
