Earlier this year, the FSA decided to reserve judgment until the autumn on whether to extend its
remit to cover buy to let through either tighter conduct rules or direct product regulation.

John Heron, group director of mortgages at Paragon Mortgages, said regulation of the buy-to-let
market would not be beneficial and the FSA may put in place inappropriate regulation as a reaction to a perceived high level of arrears in the sector.

He said: “The FSA wrongly believes that buy-to-let is risky, but there is little evidence to support this. Arrears levels in this sector are no higher than the mainstream market. A proper analysis of the sector is needed if regulation is to be imposed, as there are many areas of the market which are misunderstood by the Government. The buy-to-let market could be saddled with unnecessary conduct of business rules and higher capital requirements.”

Heron added that the consequence of heavyhanded and ill-considered regulation would be even less availability of buy-to-let mortgages.

He added: “It would mean an increase in the cost of buy-to-let mortgages, leading to a shortage of private rented property, which in turn would push rents up and put the most vulnerable in society at risk.”

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David Whittaker, managing director of Mortgages for Business, agreed that regulation would not benefit or protect investors.

He said: “Buy to let is a commercial transaction rather than an investment. Regulation would not
have a positive impact, as it would fail to negate the perceived risky areas of the buy-to-let market, such as losing tenants or protecting the borrower should they be unable to meet repayments.”

Robin Gordon-Walker, spokesperson for the FSA, said that it would be a logical fit, if the regulator were to expand its remit to cover the buy-to-let market.