The BSA said in its response to the Treasury’s consultation that extending regulation to buy-to-let mortgages would fail to address the underlying issues in the buy-to-let sector and, could result in even more lenders’ withdrawing from the market as new proposals fail to reflect the investment decisions that buy-to-let borrowers make.
Commenting on Government proposals to regulate buy-to-let mortgages, Paul Broadhead, head of mortgage policy at the BSA, said: “The decision to enter into the buy-to-let market is an investment decision made by the borrower. Including buy-to-let mortgages in the same regime as owner occupied mortgages would not be practical. Subjecting buy-to-let investors to affordability and suitability assessments in the same way as owner occupiers is not appropriate, and would result in a further constraint in the supply of quality housing to the private rental sector.
“Only regulating part of the market makes no sense at all and would only serve to confuse the market and to provide a loophole that less reputable organisations could take advantage of.”
The Government also proposes to explore extending FSA regulation to second charge lending and looks at how borrowers can be protected when mortgages are sold on.
Broadhead said: “We support the principle of the regulation of second charge mortgages being transferred to the FSA. This will importantly make a single regulator responsible for both first and second charge mortgages. That said there will be practical difficulties particularly with regards to the transitional arrangements therefore it is important these are constructed to protect existing borrowers and lenders, as responsibility is transferred from the OFT to the FSA.
“We also agree that firms buy mortgage books should be regulated. It is unfair that consumers who find their mortgage is sold on by their lender are exempted from the benefits of regulatory protection that other customers receive.”