When you’ve been working in an industry for a long time, you sometimes think there’s nothing that can surprise you. However, today I’ll freely admit to being somewhat surprised, but also rather pleased, by the message coming out of the Bank of England’s Financial Policy Committee (FPC) regarding further intervention in the buy-to-let market.
For those that haven’t seen it, today the FPC has stated that while it continues to keep a watchful eye on the sector it thinks, “…at present, [there is] no immediate case for action in the buy-to-let mortgage market. However the FPC is alert to the rapid growth of the market and the potential developments in underwriting standards.”
This will probably be somewhat surprising to most stakeholders because, I’m sure like me, many were anticipating the FPC would take up the same formal powers it has over the residential market and use them quite quickly. Indeed, the direction of travel was certainly indicating such action and to my mind there was a degree of inevitability about such intervention. Most were expecting this to take place before the end of the year.
Of course, the message coming out doesn’t preclude that action at all, but for a sector which has probably seen more than its fair share of intervention in 2015, I think a period of relative calm and stability is to be welcomed.
There are however clear warnings within that statement. Firstly the use of the words ‘at present’ suggests this decision could be changed, and changed quickly. Secondly the FPC considers the recent growth to be ‘rapid’ which again suggests it might view it as being out of control soon.
Finally, there is a clear warning to lenders here in the use of the words, ‘potential developments in underwriting standards’. I have been like a broken record for some time about the responsibilities on lenders not to go running up the risk curve chasing buy-to-let business volume at any cost. Some lenders are already loosening criteria far too liberally in my view and the chances of the FPC using those powers will be far greater if the lending community is not able to control itself.
We are being warned to keep a tight control on our criteria and underwriting standards here and if there are lenders who are unable to heed that warning then it’s quite obvious that action will be taken. Nobody should be surprised by that.
Bob Young is chief executive officer of Fleet Mortgages
