Bank of England given powers to control buy-to-let mortgages


The Bank of England is taking an ever more robust approach to the buy to let sector and has been given new powers by the Government to control buy to let loan to values. A prudent approach to lending is essential in ensuring that new loans are sustainable over time and through changing market conditions, but it is hard to understand just why the Government is so intent on creating more and more barriers to entry to the private buy-to-let market place. Clearly, they have invested heavily in the institutional PRS sector and have sponsored this asset class from inception right through its market entry- perhaps the Government believes that they can meet housing need and achieve better quality and regulation by driving more and more supply through this channel.

The reality is of course, that this sector, in its purest form, will not satisfy demand where it is most acute, in the mid-markets. The PRS handbook which was published by the government, promoted a set of guidelines for delivery which included recommended floor plans which are now appearing in numerous schemes in almost identical form across the country. The standard 2 bed PRS  ‘horseshoe’ configuration, for example, has two bedrooms with direct access from the living room. There is little diversity in delivery and a real focus on core city centres where premium rents will be a prerequisite of the success of any PRS fund, as will a very tight handle on gross to net costs, which are yet to be proven.

It remains to be seen what impact this latest layer of regulation will have on activity in the buy to let sector, following hard on the heels of the stamp duty premium and changes to wear and tear allowances and mortgage interest relief.

It is a grave error in our view to try and regulate the sector to this degree- individual investors are the lifeblood of the private rented sector and sweeping regulatory changes of this nature are excessive and unfair.