Regulating buy-to-let no answer

Nia Williams

October 9, 2009

Chief Executive, Adam Tyler commented: “There have been numerous calls for the sector to be regulated, but I am unsure as to what people think ‘regulating the buy-to-let sector’ would actually consist of and what, more importantly, this would achieve. Many lenders have been treating buy-to-let as a regulated contract for some time now, and it certainly hasn’t prevented them or their clients from getting themselves into trouble.”

He continued: “The primary problem is the refusal to acknowledge that buy-to-let is a primarily a commercial transaction. Buy-to-let is not – as it has often been painted – either a simple investment decision, or a get rich quick scheme. A loan is to purchase a property to be rented out is a commercial investment, and as such really it is not an investment for the average consumer unless they have really done their homework.

“The call for regulation is to protect novice investors who have been sucked in to investing in buy-to-let by tales of millionaire property landlords and endless television programmes on the subject, and who now find themselves with an investment falling in value and struggling to find tenants. How would regulating the mortgage used to buy this property prevent this in any way? With a buy-to-let investment, the investor will be expected to do the research to see that their chosen investment vehicle – the property itself – is suitable, is in the right location, and complies with all the necessary legislation – basically that it is a good investment. The investment vehicle for a buy-to-let is a property not itself a financial product, so the FSA will be unable to protect consumers here.

“The NACFB is not anti-regulation, the reason it was established 17 years ago was to protect the consumer; but we do believe that because it is so expensive, regulation should be intelligent and should help solve the problems it was designed to address.

“We are happy to work with the FSA to discuss potential solutions, but the current market seems to have enough problems right now and it seems a shame to spend millions on a magic bullet that we doubt will hit its intended target.”

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