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The Bank of England Has the Power to Regulate the Buy-to-Let Market





Welcome back to the Experience Invest blog, where we discuss the latest trends in the residential market, student accommodation and care home investments. This week we learnt that the Bank of England has the power to regulate the buy-to-let market, just as it does the rest of the residential market.

To prevent house prices escalating in an environment of increasing demand for homes, measures were put into place to limit the number of residential mortgages provided by banks to individuals wishing to borrow more than 4.5 times their income. The measures, which also require banks to ensure customers are able keep up with their loan repayments should interest rates rise, apply to buy-to-let mortgages too.

Prior to this week, it was commonly believed by many in the industry that these rules did not apply to the buy-to-let market.

For many, buy-to-let is an attractive investment option, offering long-term rental returns, especially for those who are able to raise a substantial deposit. The current relatively low mortgage rates make the prospect even more appealing.

The news, which could mean that buy-to-let mortgages may be harder to come by, came to light at a Treasury Select Committee. The Chancellor, George Osborne was asked whether he agreed with the Governor of the Bank of England, Mark Carney that buy-to-let mortgages were a threat to the recovery of the UK economy. Osborne’s response confirmed that the Bank of England and the Financial Policy Committee had been granted additional powers over the buy-to-let market.

The stricter regulations surrounding mortgages were originally implemented to prevent the boom and bust scenarios of the past. However some experts are warning that by restricting the buy-to-let market, supply of readily available homes will fall further, causing demand for residential property to escalate further.

Ray Clancy, Editor of Property Wire, believes the move to implement tougher measures at a time when new homes are in short supply, may be premature. In his weekly round-up message he commented:

“The growth of buy-to-let lending has been widely welcomed, giving existing landlords the ability to extend their portfolios and attract new landlords to the market.

“It would be short sighted to limit landlords’ ability to deliver quality rented accommodation when many people rely on this sector and folly if the Bank and the Chancellor do not fully consult going forward.”

You can read Clancy’s full comment here.

If you are considering investing in residential property, or would like to know more about the sector, why not contact Experience Invest. We have a wide selection of residential investment opportunities available across the UK.

About Experience Invest

Experience Invest is a London-based independent property specialist. We focus on sourcing real estate opportunities across the UK. Our specialisms include residential investments, student property and care home investments. We work with clients in the UK and internationally. The company is regularly featured in the press, including in The Telegraph newspaper, on Yahoo Finance, and by the global news organisations Reuters.

Experience Invest recently announced the launch of One Wolstenholme Square, a brand new residential development in the heart of Liverpool. If you are interested in finding out more about this exciting residential investment opportunity please visit the website for full details.