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12 | Buy-to-let
Is the tide
turning?
David Finlay, intermediary business
director at Woolwich, considers the
issue of regulation relating to the
buy-to-let market
T
he call for the regulation of the buy-to- As many as 81 per cent of respondents agreed was a review of residential property in which
let market is nothing new. In fact ever that repossessions will increase overall in 2008, Sir Bryan Carsberg, formerly director-general
since the introduction of the FSA while 31 per cent expected to see shortfalls of Oftel and the Office of Fair Trading called
regime to the mortgage market there increase following sales of repossessed properties. for a radical overhaul of the administration
has been a certain clammer for the Of the 68 per cent of respondents who agreed and regulation of the market in England and
inclusion of the buy-to-let sector but this appears that buy-to-let repossessions would increase, 38 Wales.
to come more in the form of random breakers per cent expected this to be by up to 10 per cent; Initiated by the Royal Institution of
banging against the FSA's door rather than a a further 31 per cent predicted a rise of between Chartered Surveyors in July 2007, along with
constant swell – Apologies for my 'Point Break' 10 per cent and 15 per cent. the National Association of Estate Agents and
moment! Thirty-five per cent of lenders questioned Association of Residential Letting Agents, the
However, despite my terrible surfing analogy, believed that void periods - periods when a review was designed to carefully examine pri-
my interest in this topic has been peaked once property is unoccupied - will be the most likely vate residential property in England and Wales.
again by a recent call for the FSA to introduce reason for repossession; 27 per cent expect the The headline recommendations from the
regulation from claims solicitor and reposses- rise to be fuelled by landlords' inability to sub- review included that estate agents should be
sions specialist Moore Blatch. This urging of the sidise their mortgages. Finally, the survey found regulated and home information packs (HIPs)
regulator comes almost a year after the same firm that 54 per cent of lenders expected an increase should be scrapped. These seemed sensible con-
highlighted the likelihood of problems within the in litigation against mortgage brokers by land- clusions to areas which the current approach
market calling for lenders, brokers and the FSA lords claiming they were not given risk-based was clearly failing to fully protect the consumer.
to make investment warning mandatory. advice. This review also helped fuel the fire for the re-
emergence of the regulatory measures to be
Survey Confidence imposed on the buy-to-let sector but once again
Harking back to this call in early 2008, research Moving back to the present day it must be said before the flames were able to be truly fanned
from Moore Blatch stated that almost nine out of that there was some strong momentum behind more bad news filtered through from the US
ten mortgage lenders wanted to see regulation these cries but this momentum was soon and rumours were rife regarding some of the
introduced specifically for buy-to-let mortgage quashed by the unfortunately memorable UK's best know lending institutions. Events that
advice. images, both in print and broadcast, of the followed just went to prove what a mess the
The results of the survey suggested that some queues and general consumer panic outside the market was in, especially in terms of credit and
new buy-to-let investors were ill prepared for the branches of Northern Rock. These images cer- liquidity issues.
financial implications of their investment, tainly resulted in the first real signs of consumer We have now come almost full circle to the
prompting lenders to call on the Government to confidence draining from the market and end of 2008 with a renewed call form Moore
regulate buy-to-let mortgage advice as if it were quelled any impetus of a regulatory call when Blatch for regulatory action to be taken.
an investment product. It also reported that 68 the Treasury confirmed that Northern Rock was It issued the warning that with the number of
per cent of lenders expected buy-to-let reposses- to be nationalised. loans in arrears approaching 2 per cent and
sion to increase, while 50 per cent of respondents As we continue to track 2008, the next plat- repossessions now standing at 0.22 per cent the
thought buy-to-let borrowers were extremely form for a regulatory clamour came in the form scale of the problem calls for immediate
vulnerable to repossession. of the Carsberg review during the Summer. This regulation.
Febuary 2009 Commercial finance Introducer www.mortgageintroducer.com
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