FSA to regulate buy-to-let lending

Permalink: FSA to regulate buy-to-let lending
by Gill Montia

In proposals for the UK mortgage market published today, the Financial Services Authority (FSA) has announced that it intends to regulate the buy-to-let lending sector.

The FSA says it wants its remit to extend to all lending secured on a home, taking in both buy-to-let and second charge mortgages.

Buy-to-let loans are currently excluded from regulation because they are seen as investment finance but recent research by mortgage broker, Exact, indicates that the majority of intermediaries are unhappy with the situation, given the high level of amateur landlords operating in the UK rental sector.

However, FSA intervention is unlikely to improve availability in an already severely contracted market; according to Paragon Mortgages, the number of buy-to-let products available has collapsed to around 190, with 94% of loans disappearing since the onset of the credit crisis.

Other key features of the FSA’s proposals include imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a borrowers’s ability to pay.

The new measures could therefore mean that “self-cert” mortgages will be banned along with loans to credit-impaired borrowers that are at high loan-to-income ratios.

On arrears, the regulator wants to stop lenders applying charges where a borrower is adhering to an agreed repayment plan.

A deadline for discussion has been set on 30th January 2010 with a statement from the FSA to follow in March.