During a Treasury Select Committee (TSC) meeting, Osborne was asked by committee member Chris Philp MP for Croydon South whether he shared concerns aired by Bank of England governor Mark Carney about the buy-to-let market.
Over recent weeks, the FPC, which is led by Mark Carney has repeated concerns that the buy-to-let sector was more sensitive to booms and busts in the housing market. However, last month the FPC determined that there was no immediate case to take action on the market.
The FPC was granted powers in the residential market last year to influence the interest rate stress test in an applicant’s affordability assessment as part of the Mortgage Market Review. Last year it was also given the nod on placing restrictions on the proportion of mortgage loans more than 4.5 times a borrower’s income held by a lender.
Addressing the TSC, Osborne said he took Carney’s views on the buy-to-let market ‘very seriously’.
“It’s true that if you look historically at the UK, one of our biggest challenges has been managing credit booms and house price cycles and that’s why we created the Financial Policy Committee in part to try and manage some of those risks. One of the problems with the system I inherited was that no one was looking out for overall debt levels in society and no one was looking at particular problems in particular sectors like housing,” he said.
“We have given the FPC powerful tools to, for example, tighten mortgage standards if they feel there’s a credit bubble developing. The governor of the Bank and the FPC have asked for additional powers over buy-to-let mortgages which weren’t included [in the Financial Stability Report] and we have granted those powers so they have that tool as well.”
Osborne would not be drawn on the specifics of the powers it would give the FPC over buy to let, but said there were ‘a number of tools’ that could be used and that it was important to consider ‘how they [the FPC] have the powers’. When asked when the FPC would be able to begin its intervention, Osborne said: “I’d better wait until we make the official announcement, but as soon as possible.”
