Chancellor George Osborne has confirmed that he intends to extend the Financial Policy Committee’s (FPC) existing powers on mortgages to include the buy to let market.
Last year the FPC was granted powers over the residential market to influence the interest rate stress test in an applicant’s affordability assessment as part of the Mortgage Market Review.
It was also given permission to place restrictions on the proportion of mortgage loans held by a lender that are more than 4.5 times a borrower’s income.
Over the past few weeks, Head of the FPC and Governor of the Bank of England, Mark Carney, has repeatedly voiced concerns about the current buy to let sector’s sensitivities to the booms and busts of the housing market.
Even so, last month the FPC determined that there was no immediate case to take action on the market.
However, when asked by Chris Philp, MP for Croydon South, this week during a Treasury Select Committee meeting whether he shared Mark Carney’s concerns about the buy to let market, Osborne concurred that he took Carney’s views ‘very seriously’.
“We have given the FPC powerful tools to, for example, tighten mortgage standards if they feel there’s a credit bubble developing. The governor of the Bank and the FPC have asked for additional powers over buy-to-let mortgages which weren’t included [in the Financial Stability Report] and we have granted those powers so they have that tool as well,”
Osborne would not be drawn any further on the details of the powers that will be granted to the FPC, but stated there would be a ‘range of tools’ available to use.
Details of when these powers will come into play will be revealed via an official announcement, but Osborne hinted that he hopes the FPC will be able to exercise its new abilities ‘as soon as possible’.