Buy to let mortgage regulation 'would fail'

Buy to let mortgage regulation 'would fail'

15 February 2010 / by Rachael Stiles

The Building Societies Association has spoken out against Government plans to include buy to let mortgage lending under the regulation remit of the Financial Services Authority.

The BSA believes that regulation of the buy to let mortgage sector 'would fail', and would be damaging for the industry because it would deter investors and therefore contradict the Government's objectives to increase investment in the private rental sector.

Furthermore, such regulation by the FSA would fail to address the underlying issues in the buy to let mortgage sector, and could result in existing mortgage lenders withdrawing from the buy to let market as regulation would fail to reflect investment decisions made by landlords.

Commenting on the proposals, Paul Broadhead, head of mortgage policy at the BSA said: "The decision to enter into the buy to let market is an investment decision made by the borrower. Including buy to let mortgages in the same regime as owner occupied mortgages would not be practical.

"Subjecting buy to let investors to affordability and suitability assessments in the same way as owner occupiers is not appropriate, and would result in a further constraint in the supply of quality housing to the private rental sector."

Mr Broadhead also believes that Government proposals to only regulate part of the market "makes no sense", because it would cause confusion and provide a loophole which some lenders could manipulate to their own advantage.

The BSA agrees in principle with the suggestion that borrowers are better protected when their mortgages are sold on to third parties – a practice which contributed to the collapse of the housing industry in 2007.

Mr. Broadhead said he agrees that firms who purchase mortgage books should be regulated. "It is unfair that consumers who find their mortgage is sold on by their lender are exempted from the benefits of regulatory protection that other customers receive."

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