News Review: Buy-to-let
Buy-to-let must fight its corner
by
Bob Young,
managing director, CHL Mortgages
in a month that saw a Budget, the dissolution of Parliament and an election, you might have presumed that this would be a ‘slow news month’ for the buy-to-let sector. How- ever, this has not been the case, indeed with a variety of housing issues in the spot- light, not least the future of the uK’s private rented sector there has been much infor- mation to digest and under- stand as we gear up for a new Parliament. the Budget at the tail end
of march was always likely to be political in thought and deed given where we were in the Parliamentary calendar. However, the ma- jor announcement affecting the buy-to-let sector came with the publication of Hm treasury’s report: ‘mortgage regulation: Summary of re- sponses’. this was a follow-up to its consultation paper in decem-
ber last year which focused on the proposed regulation of not just buy-to-let mort- gages but also second-charge lending, and the protection of consumers where their mort- gages have been sold on to unregulated firms. unlike its plans for sec-
ond-charge lending where it intends to move forward to full regulation, Hm treasury clearly received a significant number of responses which have made it think again about a similar pathway for buy-to-let mortgages - partic- ularly in terms of the poten- tial negative impact regula- tion could have on the growth of the private rental sector. it is perhaps not surpris-
ing that this paper reveals it will now re-look at some of its original proposals. those industry players who were advocating keeping buy-to-let outside the auspices of what- ever future regulatory body we may have will be disap- pointed it seems as the docu- ment is explicit in its rejec- tion of the status quo. it says that “there is overwhelming evidence that the operation of some of the buy-to-let market
Continuing the negative campaigning vibe, it is interesting to see the buy-to-let sector continuing to take a bashing from those who deem it responsible for all the ills of this nation. A recent Freedom of Information request has thrown up a briefing paper written by the Treasury in 2004 which looked at the housing market and the number of first-time buyers getting on to the ladder and highlighted that this type of buyer would, quelle surprise, be competing with buy-to-let landlords to purchase properties.
What this purports to show is that the
Government could have prevented the ‘buy-to- let boom’ by somehow contriving to allow first-
8 mortgage introducer MAY 2010
One sentence in the Treasury’s paper did jump out at me and it reads as follows: “The Government agrees that further work may be needed to clarify the role of buy-to-let in the crisis.” An interesting statement to make given where we are in the economic cycle, the measures that have already supposedly been put in place to stop such a crisis taking place again and the nature of the lending that took place pre-crisis. I am in danger of becoming a broken record, however, there continues to be an assumption that those who may be deemed ‘specialist lenders’ were somehow much more culpable in delivering the crisis than those who have been forced to take the taxpayer’s shilling and could be deemed ‘high street’. One thing I would like the powers-that-be to do is clarify the nature of responsible lending versus the exact opposite.
timers to purchase these properties instead. Firstly, the assumption again is that buy-to- let is single-handedly to blame for the credit crunch, recession and no doubt the Great Fire of London. Secondly, this again tars the whole sector with the same brush and fails to mention the strong contribution that the private rental sector makes to the UK’s housing supply. Thirdly, first-time buyers have always competed with buy-to-let investors for properties; this is no different now to back in 2004 or six or more years before that.
A simple truth: blaming the buy-to-let market will not get more first-time buyers on to the housing ladder.
has suffered from significant market failure and that this demands government inter- vention”. the major concerns about regulation of the buy-to-let sector centred on two areas: the impact of regulation on professional landlords and ‘the role of advice in recent harmful practices’. We were concerned that individuals with significant property portfolios could be caught up by the regulation as it was previously proposed. Business-to-business lend- ing had been excluded by the initial consultation, however, this still left those with prop- erty portfolios, but acting as individuals, exposed. the ar- gument was, and is, that the sort of consumer protection proposed by the treasury could hamper the businesses of these individual profes- sional landlords. many in the mortgage in-
dustry, including the cmL and BSa, have already sug- gested that covering buy-to- let mortgages - which would limit the regulation to the advice and decision to take out the loan - fails to address the issue of poor investment advice which is actually the main cause of consumer det- riment, and not the actual mortgage itself. the upshot of all this is that
the treasury is holding fire on buy-to-let regulation and re- assessing where and in what circumstances it will be ap- propriate. the status quo remains and continues. While some might say this is a stay of execution for buy-to-let, the industry must continue to fight its corner.
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