IMLA warns against a ‘rush to judgement’ on BoE warning

John Heron, Director of the Intermediary Mortgage Lenders Association (IMLA), comments on the Bank of England’s warnings about growth in buy-to-let lending.

Related topics:  Landlords
Warren Lewis
6th July 2015
To Let 2

“The Bank of England’s comments on BTL are based on their observation of strong growth in lending in recent years. It should be understood, however, that while there has been substantial growth, this has been from a low base post-crisis and lending today is still no greater than it was 10 years ago and is well below the levels achieved before the crisis in 2007.

The rising cost of homeownership is among many factors driving demand for rental properties, including the fall in social housing, changing work patterns, growing numbers of students, high levels of immigration, later marriage and rising separation rates. Housing needs are changing – and in fact, IMLA analysis shows fewer than one in three extra properties to enter the private rental sector since 2007 have been backed by a BTL mortgage.

Lending has therefore been responding to rather than leading demand. Increased competition is also having a markedly lower impact in BTL than the residential mortgage market. Despite the increase in higher loan to value (LTV) products, few go above 80% LTV compared to a pre-crisis norm of 85% LTV. These 80%-plus products also have a very small share of the marketplace, with the Council of Mortgage Lenders (CML) estimating that they account for less than 1% of lending. Lenders have been quick to adopt the CML’s BTL Statement of Practice, and have tightened much of their lending criteria – particularly where LTVs are concerned.

So far we have seen no evidence of a glut of new BTL investors spurred on by the new pension freedoms. The size of the average pension pot and the tax implications of withdrawing large sums required for investment are likely to mean that any impact remains at the margins. We look forward to an open and frank debate on BTL growth but strongly urge against a rush to judgement.”

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