Bank of England
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Latest property news
Investors hung out to dry as BoE gets tough
The Bank of England has announced plans to introduce more stringent checks on buy-to-let lenders amid concerns that the property investment market is moving into bubble territory. The Bank’s Prudential Regulation Authority said it was putting in place a “guardrail” to prevent banks from making risky loans, warning that 20 per cent of lenders were not carrying out the necessary checks. The main concern is that a bubble in the buy-to-let market could cause a wider housing market slowdown, which would be bad news for millions of people who have invested in property, as part of their retirement. More than 1.7 million properties have buy-to-let mortgages, which represented 17 per cent of loans used to acquire residential properties last year. “You might form expectations about what the necessary long-term saving to support your retirement will be, which can then (if house prices fall) be transformed quite suddenly in ways that, frankly, are unwelcome,” Bailey said. Andrew Bailey (left), who currently heads up the Prudential Regulation Authority, told the press that the Bank of England has “nothing against” buy-to-let landlords, but believes that new restrictions on mortgages for buy-to-let investors will help reduce the risk of “very volatile boom and bust…
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Latest property news
Bank of England to consult on buy-to-let ‘prudence’
The Bank of England has published a consultation paper (CP) which seeks views on its proposals which could result in strict limitations for buy-to-let mortgages. David Smith (left), the Residential Landlords Association’s Policy Director said, “The Bank needs to be careful that it does not over-react to the current surge in buy to let applications which are aiming to beat the tax increases coming in April. ‘These include a three percentage points extra levy on stamp duty and abolition of mortgage interest relief. It is likely that the impact of these will significantly reduce the demand for borrowing. “We would urge the Bank to tread carefully and avoid any premature moves that could stifle the supply of the 1 million rental properties the country desperately needs.” The consultation paper says: Underwriting standards for buy-to-let mortgage contracts – CP11/16 Background This consultation paper (CP) seeks views on a supervisory statement which sets out the Prudential Regulation Authority’s (PRA’s) proposals regarding its expectations of minimum standards that firms should meet when underwriting buy-to-let mortgage contracts. The proposals also include clarification regarding application of the small and medium enterprises (SME) supporting factor on buy-to-let mortgages. Summary of proposals The proposals seek to ensure…
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Latest property news
Buy-to-let mortgages to be overseen by BoE
Growth in the buy-to-let sector could soon come to a very abrupt end if the Chancellor George Osborne presses ahead with plans to regulate those mortgages available to landlords. The Chancellor announced late last week during a Treasury Committee hearing that he intended to give the Bank of England (BoE) additional powers to regulate the buy-to-let mortgage market. While the stock of owner-occupier mortgage lending has risen by just 2 per cent since 2008, buy-to-let mortgage lending has increased by more than 40 per cent over the same period. But growth could come to an end after the Bank, which already has the power to regulate the wider the residential mortgage market, was also given the authority to regulate the buy-to-let sector too, should it wish to do so. BoE warned last month that Britain’s buy-to-let market poses an increasing threat to financial stability because rising property prices expose vulnerabilities that could magnify a housing market crash. The Financial Policy Committee, led by Governor Mark Carney, said landlords were more sensitive to booms and busts, often buying property when prices increase but also selling homes swiftly during a downturn. Peter Williams (left), Executive Director of the Intermediary Mortgage Lenders Association…
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Housing Market
Homeowners urged to factor in interest rate rise
People thinking of buying a home or remortgaging their existing property should budget for a potential interest rate increase in the coming months after the Bank of England signified that it expects to see interest rates rise sooner rather than later. UK interest rates have remained at a record low of 0.5 per cent since March 2009, and although any hike to the rate would be dictated by economic data, including wage growth and productivity, over the next few months, the Governor of the Bank of England, Mark Carney (left), did last week admit that the time for an increase is ‘drawing closer’. It is not clear when the rate rise may occur, but Nicholas Leeming (right), Chairman of agents Jackson-Stops & Staff, is urging homeowners not to take any chances. He said, “Mark Carney has been careful to flag that interest rates will edge higher in the longer term as the economy continues to grow and inflationary pressure on wages increase. “Property buyers should recognise that rates will move towards more sustainable, long term levels and so budget for higher mortgage costs accordingly. Vendors should be aware that any such increases will create resistance to overly high guide prices.”…
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