Bank of England quizzing lenders over buy to let stress tests

The Financial Times reports that the Bank of England is questioning buy to let mortgage lenders and banks as part of a move to restrict lending only to the ‘safest’ of investments. 

The FT says supervisors from the Prudential Regulation Authority have visited at least three major lenders in the last two weeks, with more to come. One unnamed source told the newspaper: “The message was clear - we think you have enough buy to let loans.”

Earlier this month the Treasury announced that the Bank had been given additional powers by the government to control mortgage lending for buy to let investors.

As part of this, from early next year the Bank’s Financial Policy Committee will be able to regulate loan to value ratios granted by lenders to borrowers. The FPC recommended in 2014 that it be given additional powers of direction over both the residential mortgage lending market and the buy to let mortgage market.

Back in March this year the FPC also indicated, as part of a consultation process, that it intended to reduce the number of new buy to let mortgages by up to 20 per cent by the end of 2018 through a range of measures including lenders being obliged to consider landlord costs associated with letting properties - including tax - and verifying incomes if earnings were to be used to support a loan.

More announcements are expected before the end of this year.