The Bank of England has asked the government to grant it new powers to control mortgage lending.
The Bank wants powers to restrict the size of loans on both residential and buy-to-let mortgages. It has frequently commented on the danger that spiralling household debt, specifically on mortgage repayments people can’t afford, poses to economic stability.
This would give the Bank a greater say in the buy-to-let market, loans which up to now have not been regulated, although Help to Buy will remain untouched as it is deemed to be functioning as it should. The Bank wants to make sure that the income that landlords receive is greater than the interest payments on their mortgages.
At the moment the Bank of England can merely make recommendations to lenders. With the new powers the bank would have the authority to direct lenders to make changes to their lending policy.
New mortgage rules have already had an effect on the residential market, making it harder to get a mortgage, sparking fears that the housing market is beginning to slow down. There is a possibility that it may have the same effect on the buy to let market.
It remains to be seen if this request will be granted, and if it is what effect it will have on the buy-to-let market and the PRS in general.
Bank of England by Matt Brown is licensed and edited under creative commons