The Council of Mortgage Lenders has told the Bank of England’s Prudential Regulation Authority not to add unnecessarily to the welter of new rules and restrictions imposed on the buy to let sector.
In its submission to a PRA consultation exercise on possible further lending restrictions, the CML says that mortgage firms have already progressively tightened their lending criteria in response to a range of measures affecting the sector, including the three per cent stamp duty surcharge on additional properties, limits on mortgage interest tax relief and the likelihood that the Financial Policy Committee (another Bank of England body) will be given powers of direction over buy to let lending. On top of this, firms may also adjust their lending plans in response to the EU referendum result, the council says.
“As the industry continues to respond to these headwinds, we believe there is a risk that the PRA’s proposals could magnify the effects on the buy to let sector. It is possible that the cumulative impact of intervention targeted at the buy to let sector could affect its strength and sustainability” the submission says.
It points out that levels of buy to let arrears are currently little more than a quarter of those in the owner occupier sector, which are themselves near an historic low point.
“And even though lenders do not extend the same levels of forbearance to landlords as they do to residential borrowers, fewer than one buy to let property in 2,500 is taken into possession” it adds.
One of many detailed points in the CML’s submission to the PRA - which you can see in full here - is the council’s request for confirmation that lenders should be able to factor in future rent increases when assessing affordability of borrowers.
“If lenders are expected to build into their calculations the effects of higher interest rates on the costs of running their businesses, it is also reasonable that they should be able to anticipate higher rental income. In many cases, rent increases are already written into the contract between landlord and tenant” notes the CML.