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Buy to let clampdown: global regulator wants UK banks to get tougher
The Basel Committee – an international forum which sets standards for bank regulations in individual countries – says financial institutions should place greater emphasis on buy to let borrowers’ ability to repay mortgages.
The Swiss-based committee this week published new proposals increasing the amounts of capital which banks are advised to keep to cover potential buy to let bad debts.
The committee has changed its advice on capital to banks, based on revised definitions on different types of loans for property purchase. Banks’ exposure to buy to let mortgages would have a higher risk weighting, meaning more capital would be needed to cover them.
This is the latest of a series of warnings given in recent days which suggest more mortgage restrictions are on the way for buy to let borrowers.
Media interviews given by a deputy governor of the Bank of England, Jon Cunliffe, included a statement to the BBC that “buy to let has grown faster than any other part of the housing market” and “when you find one sector of the property market growing fast…then I think you have to ask questions about are there risks here, and you have to monitor those risks and if necessary you have to take action to curtail those risks.”
The BoE’s recent Financial Stability Report stated that the authorities would not look favourably on any relaxation of buy to let lending criteria being offered by mortgage companies, such as reducing the size of deposits or income requirements.
“The committee remains alert to the rapid growth of the UK buy to let market, and potential developments in underwriting standards as the sector could pose a risk to broader financial stability,” the Bank of England said in its report.
