Government plans to sell off its Bradford & Bingley mortgage book may see taxpayers get a bad deal if Basel proposals to increase capital requirements go ahead, Peter Williams has warned.
Government plans to sell off its Bradford & Bingley mortgage book may see taxpayers get a bad deal if Basel proposals to increase capital requirements go ahead, Peter Williams has warned.
The executive director of the Intermediary Mortgage Lenders Association said proposals currently being consulted on by the Basel Committee were likely to put buyers off and make it impossible to value the assets fairly.
He said: “There is a good chance the sale of these assets will be compromised as a result of proposals being considered by the Basel Committee.
“If implemented, these would require any buyer of the mortgages to hold almost three times as much capital against them as they would today.
“At this level the assets may be deeply unattractive to many investors which will reduce the revenue the sale could generate.
“Furthermore, if there is continuing uncertainty around capital weights for buy-to-let mortgages it may be difficult to achieve a sale at all because the market will not know how to price them."
The stark warning followed yesterday’s announcement in the Budget that the government plans to sell the B&B mortgage book to repay nearly £16bn of debt.
However a large proportion of the assets are buy-to-let mortgages which are the subject of the latest consultation on credit risk weightings from the Basel Committee on Banking Supervision.
Williams added: “There is no evidence to support the Basel Committee's proposals for higher levels of capital for buy-to-let mortgages; on the contrary, buy-to-let loans have much lower levels of arrears than other mortgages.
“The Basel proposals make no sense at all, but if implemented they may well scupper the plans for the sale of the B&B portfolio and with it the Chancellor's promise of a budget surplus by the end of this parliament."
The latest figures from the Council of Mortgage Lenders show buy-to-let mortgages have a strong track record for credit quality with arrears at around half the level of the market more generally and just 0.58% of loans over three months in arrears.
