TSC member and Conservative MP for Croydon South Chris Philp, wants to see a level playing field established between lenders’ underwriting standards in the residential and buy-to-let markets to stop landlords securing mortgages under looser terms.
Philp pointed to the use of interest-only as an example, stating that some 70% of all buy-to-let mortgages were offered on this basis and described the use of softer affordability terms as ‘unhealthy’.
Appearing in front of the committee Carney (pictured), said that the Treasury had committed to a consultation with the Financial Policy Committee on its recommendation to be given the power to change lending policy in the buy-to-let sector should it pose a risk to stability in the wider market.
But Carney defended the buy-to-let sector’s use of interest-only which he said made sense from the point of view of ‘tax deductibility’ and said that landlord mortgages were offered on lower loan-to-values which provided a ‘cushion’ of equity.
He said that because the FPC had taken an interest in buy to let and was undertaking further work in that market, there should be no ‘presumption of action in that work’.
Philp said he was aware that the government had already delayed the consultation and it was his view that it should happen as soon as possible.
Philp made it clear that Carney had his full backing on the FPC’s request.
He said: “…when you come to consider these issues, as hopefully you will if you are given these extra powers, I would like it on record that I fully support the FPC having these powers at the earliest opportunity.”
Philp urged Carney, if the powers were granted, to consider not only the creditworthiness of the loan but its impact on the overall stability to the housing market. Carney confirmed that that was the FPC’s intention.
