Rapid growth of buy to let lending puts sector in spotlight

Figures released this week from the Bank of England and Financial Conduct Authority show rapid growth in buy to let mortgage lending and lead to industry speculation that the Financial Policy Committee is “increasingly likely” to receive additional powers over the BTL sector.

The latest figures point to a rise of 18.5% in buy to let lending: from £7bn in the second quarter of 2014 to £8.3bn in Q2 2015.

The rapid growth of the buy to let market has already attracted attention from policymakers. The Bank of England warned in July that the financial stability of the UK could be jeopardized by the BTL market, due to the relative ease with which mortgagors are able to access finance in this sector.

A consultation by the Treasury, which will review whether the FPC should be given the power to contain buy to let lending, is scheduled to take place later this year. The committee already has the power to cap LTIs and LTVs.

Industry expert, Ed Stansfield of Capital Economics is reported as saying that, since the Mortgage Market Review, lenders have shifted their activity from regulated owner-occupied lending to unregulated buy to let mortgages.

He added that while buy to let’s share of total lending has fallen recently, this was largely “driven by strengthening regulated mortgage lending, not lenders pulling back from buy-to-let loans”.

He concluded:

“The FPC expressed concerns in July about the buy to let sector and its possible effects on financial stability. With the size of the sector growing further, it looks increasingly likely that the FPC will receive additional powers over the sector when the Treasury consults on the issue later this year.”