In their newly published report on the buy-to-let market, the British Housing Federation (BHF) call for responsible regulations and a reform of the mortgage market. They say that the ‘black hole of irresponsible lending’ damaged the reputation of the housing sector, as well as the ability of banks to lend money. They also argue that the current practice of treating buy-to-let mortgages as simple business loans as opposed to the majority of mortgage loans, which are regulated, is wrong. Regulating this sector of the market, they say, would put it on a sounder footing, as well as protecting tenants against eviction should their landlords fall into financial difficulties.
Speaking about the newly published report, BHF’s Director of Policy, Ian Fletcher, said:
Many lenders simply threw money at buy-to-let borrowers during the boom without sufficient checks on who they were lending to or what they were lending for. Consumers have suffered as their buy-to-let dream turned sour and many buy-to-let lenders were at the root of our economic problems as organisations, such as Bradford and Bingley, found themselves over exposed to bad loans.
The BHF comprises a whole range of industry members: property developers, property owners, fund managers, investment banks and professional organisations, and this report has been backed by leading UK estate agents, Savills. Savills Private Finance director, Mark Harris, said:
The buy-to-let market has borne the brunt of the credit crunch and, with a dearth of suitable finance available for professional landlords, we could well see an increase in repossessions. It’s vital, therefore, that measures are in place to ensure the private rental market can continue to expand. Better regulation is therefore needed if we are to move from an age of recklessness into a period of responsibility.
The BHF report comes within weeks of news that Britain’s leading mortgage lender, the Lloyds Banking Group, has imposed stricter rules on buy-to-let lending. On 14th September, it was reported that the Lloyds Banking Group, which is majority owned by the taxpayer, will restrict the buy-to-let investor to a total of nine properties across all of its brands.
The Group includes such brands as: Lloyds TSB, Cheltenham & Gloucester, Halifax, Bank of Scotland, Intelligent Finance, Birmingham Midshires, Scottish Widows Bank, and The Mortgage Business.
The restrictions go even further, with no single individual being allowed to borrow more than a £3m total against rental properties across these same brands.