The Financial Policy Committee (FPC), the body who are tasked with monitoring, reducing and removing risks in the British financial system have been granted the new powers in an effort to increase the tools available to eradicate any threats to financial stability before they become an issue.
From early 2017, the FPC will have the ability to direct the Prudential Regulation Authority and Financial Conduct Authority in relation to placing limits on buy to let mortgages, initially around loan to value and interest coverage ratios.
These changes follow on from the FPCs recommendation that it be given additional powers of direction over the residential and buy to let market in September 2014. Although powers over the residential market were granted in April 2015, it is only now, after consultation that action has been taken to grant addition scope in the buy to let market.
At ABC Finance we are already beginning to see the effects of these changes in the market, with leading buy to let lender Precise Mortgages recently making their position clear, with others expected to follow suit. The latest date for cases to be assessed under current rules is expected to be around mid-December, although a late charge to secure terms is expected, it would be very wise to act quickly as service levels are likely to suffer as the deadline looms, leaving many struggling with new criteria, products and the associated teething problems.
Following on from the buy to let tax rules being introduced, there is a significant amount of change in the buy to let market at the moment and it is proving difficult for many landlords to understand. What may have been best previously, is now changing, leaving many landlords having to review lending across their entire portfolios.
There has been talk of an attack on landlords, although the FPC consultation did note the positive impact of landlords, in terms of providing good quality accommodation for those unable to buy and balancing the housing market. The balancing of the housing market is considered key and with this, any perceived attack can only go so far, mentions of long-term stability show the government, although keen to evolve the market, recognise the importance of landlords in the wider market.