BPF speaks out on “black hole” of buy-to-let lending

Permalink: BPF speaks out on “black hole” of buy-to-let lending
by Gill Montia

The British Property Federation (BPF) has added its voice to calls for the regulation of buy-to-let mortgages, which are currently regarded as business loans.

The organisation, which says it represents the interests of all those involved in property ownership and investment, believes such a move would deter possible reckless lending in the future.

In a new report entitled “Responsible Regulation”, the BPF claims that the Financial Services Authority and Treasury were aware of “dubious practice” in the residential property investment market as far back as 2005.

According to the study: “The black hole of irresponsible lending has damaged both the housing sector’s reputation and the ability of banks to lend”.

The Federation’s director of policy, Ian Fletcher, explains: “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.”

He adds: “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.”

However, the buy-to-let mortgage market has shrunk dramatically over the past two years, with Paragon Mortgages estimating that only 196 remain.

Some analysts are therefore wary of FSA intervention, fearing that it could reduce availability even more.