Regulator tells Treasury select committee that lending is expected to ‘cool significantly’ on coming months.
Banks and building societies are expected to curb buy-to-let lending in the aftermath of the vote for Brexit, according to one of the UK’s most senior regulators.
Richard Sharp, an external member of the Bank of England’s financial policy committee, told MPs on the Treasury select committee yesterday that buy-to-let lending would probably “cool significantly” in the coming months, reports theDaily Telegraph.
“I suspect the banks will want to see what regime we’re in in terms of house prices before they go back to aggressive lending,” he said.
Bank of England governor Mark Carney warned during his evidence to the committee, which is investigating the fallout from the EU referendum, that even though central bank action could prevent a credit crunch, it was not a “silver bullet” and that demand for loans depended on the economy.
The comments are the latest to predict banks will take a more circumspect view of buy-to-let in the months and years ahead, primarily due to changes to the way landlords are taxed.
Under new recommendations from the financial policy committee, prospective landlords will need to ensure their rental income offers greater cover on their borrowing. Barclays, TSB and Nationwide have already implemented a proposal for rental income to provide 145 per cent mortgage cover.
To get the loan down to a sufficient level based on current rents, crowd-funding website Property Partner says minimum buy-to-let deposits could rise to 60 per cent in some areas, the Telegraph reports.
Buy-to-let borrowing has fallen sharply following the increase in stamp duty on second homes from April.
Council for Mortgage Lenders figures show buy-to-let issuance in May was around half of what it was in the same month last year, says FTAdviser, remaining around 85 per cent down on the bumper sums borrowed in March to beat the stamp-duty hike.
SOURCE: The Week
