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Darling clamps down on buy-to-let
Chancellor of the Exchequer Alistair Darling proposes to extend the FSA's powers to oversee buy-to-let loans and second mortgages. The FSA has already proposed tighter controls on the mortgage market including a ban on self-certification mortgages. Darling wants even tighter controls to prevent households taking on too much debt and lenders making risky loans. Buy-to-let loans are currently unregulated and second loans are supervised by the Office of Fair Trading.
"We see the logic of regulating second-charge mortgages," Hector Sants, CEO of the FSA, said. "We would be welcoming of the proposals from government today, and that is consistent with some of the proposals we put forward in our own mortgage review."
The Council of Mortgage Lenders asks whether the Treasury's main rationale for the proposed extension to scope relates to market risk or consumer protection. If the aim is to protect amateur property investors from poor property investment decisions, then regulating the mortgage process - as opposed to the sale process - will not necessarily address this. And there is little evidence of consumer detriment to buy-to-let mortgage borrowers arising out of their mortgage borrowing, so the case for extending regulatory scope here is not clear cut.
Michael Coogan said "2010 is clearly going to be a year of regulatory change for mortgage lenders - but it's important that change should have a clear rationale and a clear set of outcomes, and not be implemented simply for its own sake as a reaction to past events that conduct of business regulation would not have prevented".