In a statement published today from its policy meeting on 23 September, the FPC said while current intervention was not deemed necessary, if the market continued to grow, particularly if driven by looser underwriting standards, the sector could pose a potential risk to the UK’s financial stability.
Debate around whether action was needed in the buy-to-let market emerged in April, when minutes from the FPC’s meeting in March notified lenders in the sector that it would be monitoring activity in the market closely.
In its most recent meeting, the FPC repeated previous concerns that a significant increase in buy-to-let activity during an upswing in the economy could add further pressure to house prices, prompting owner-occupier buyers to take on even larger loans.
However, it noted that the reduction of mortgage interest tax relief announced in the July Budget, was likely to reduce investors’ desire to take on increased leverage. It added that there was little evidence that lenders’ underwriting standards in the buy-to-let sector had fallen.
The FPC said it supported intentions set out by the Bank and the Prudential Regulation Authority to develop data sets to monitor underwriting standards within the market.
The committee has also concluded that under current market conditions, the Help to Buy mortgage guarantee scheme which is due to expire next year, does not pose a material risk to financial stability.
It added it did not see a case for imposing a cap on house prices at present.
