Addressing delegates at the Association of Short Term Lenders conference, Cable (pictured) said he shared concerns voiced by the Financial Policy Committee in recent months about the buy-to-let sector.
Mortgage Solutions asked what action needed to be taken on buy-to-let activity if necessary.
Cable said: “I think my former colleague George Osborne has done the right thing, which is to tighten up on tax relief. It seems to me there is absolutely no justification whatsoever for giving preferential tax treatment for borrowing on buy to let as opposed to borrowing for other forms of investment. I would be surprised if the government doesn’t tighten this up further.”
Cable criticised the Chancellor’s decision to introduce the Help to Buy initiative in the previous coalition government, which he said has had the opposite effect on house prices than originally intended.
“We’ve got to a position where residential property is almost entirely unaffordable for people on average incomes. The market, of course, has been fuelled by Help to Buy, one of my big disagreements with my colleague Mr Osborne,” he added.
“Evidence published last week shows that the initiative has pushed up house prices somewhere between £8,000 and £10,000 across the country. Which is good if you’re a homeowner but terrible on the basis of affordability.”
Discussing the legacies that the financial crisis had left behind, Cable added that the UK had failed to address problems within the property market, with activity now reaching peaks seen right before the crisis.
“What happened since the crisis is that there was initially fall in the ratio of house prices to earnings but it has not been corrected. While the US, Spain and Ireland had a clear out of their property market and went back to the previous trough seen in activity, in the UK we didn’t and the residential property market started taking off again and we’re now back to previous peaks. This is a very abnormal state of affairs and to my mind, worrying,” he said.
