The FPC has been given the green light to direct the PRA and FCA to require regulated lenders to place limits on buy-to-let mortgage lending in relation to LTV ratios and interest coverage ratios. According to the government, this will help the committee "protect the financial system from future risks in the buy-to-let mortgage market".
It follows a consultation which was launched by the Treasury in December, at a time when the Bank was warning about the impact of the sector, because of concerns that landlords would be more likely to sell if they ran into payment difficulties; in turn, the markets could be flooded with properties and affect home buyers. The government granted the FPC powers over the residential mortgage lending market in April 2015.
Chancellor Philip Hammond, commented: "It is crucial that Britain’s independent regulators have the tools they need to keep our financial system as safe as possible.
Expanding the number of tools at the Financial Policy Committee’s disposal will ensure that the buy-to-let sector can continue to make an important contribution to our economy, while allowing the regulator to address any potential risks to financial stability."
