Speaking at a Treasury Committee meeting, external member of the Bank of England’s Financial Policy Committee Martin Taylor said the Bank would need to first assess the impact of a 3% Stamp Duty levy on the market as well as how borrowers would be affected by a cap on mortgage interest rate relief. He noted that banks had been ‘dashing’ in to offering buy-to-let loans in recent years.
Last year the Prudential Regulation Authority (PRA) announced it would launch an inquiry into underwriting standards in the sector, after the Bank continued to raise concerns about the impact of heightened buy-to-let activity on the economy.
Taylor said: “The most important thing to understand is, first of all, what is happening to underwriting standards at the banks. We would be concerned if underwriting standards were deteriorating and we await with interest to the PRA’s work on this.
“Second, we’re trying to understand what reaction the two tax changes are likely to have on this market. It may be they will cool the market without any need for macro-prudential intervention.”
Also addressing MPs at the Treasury Committee, Bank of England governor Mark Carney said: “There’s no specific move [on buy to let] here but the issue is that if we determine that action should be taken on buy to let, it’s far better to take action instantaneously.”
The Bank was also questioned on whether it had any influence on the Financial Conduct Authority’s recent decision to drop its review into culture at UK banks.
Carney explained that the decision was ‘entirely’ down to the regulator’s senior management and was not made aware of the announcement until it entered the public domain at the end of last year.
He said: “I don’t think we [Bank of England] have any apology to make on culture. We have surfaced these issues of banking culture and culture in the financial markets because they have started to affect the delivery of our remit of financial stability. We have spoken at length on these issues and we have helped devise a series of measures consistent with our responsibilities to help address them.
“I have every confidence that the new CEO of the FCA and the senior management of the FCA will be addressing these issues but they are the ones to answer for this.”
Today the FCA announced that Andrew Bailey, deputy governor of prudential regulation at the Bank of England and chief executive of the Prudential Regulation Authority (PRA) had been chosen to head up the regulator. Bailey will take over from Tracey McDermott, who is currently interim CEO, when a replacement is found for him at the PRA.
