Carney vows action on buy-to-let market

December 15, 2015 10:58 pm Published by

Carney promises action on buy-to-let property market

  • 15 December 2015
  • From the section Business

Mark CarneyImage copyright

The Bank of England has again expressed concern about the UK’s buy-to-let property market.

The Bank’s governor, Mark Carney, said he was concerned about high levels of lending to landlords and that the Bank would take action.

“There are a number of things happening … we are watching it closely and we will take action,” he told the FT.

Mr Carney said in the interview that investors could seek to sell properties at the same time if house prices fell.

In September the Bank’s Financial Policy Committee (FPC) made a similar warning about the buy-to-let market.

The committee, which is led by Mr Carney, said the market posed a threat to the UK’s financial stability.

Lending to landlords had risen by more than 40% since 2008, while mortgages to owner-occupiers was up by just 2% over the same period.

“The stock of buy-to-let lending might be disproportionately vulnerable to very large falls in house prices,” the FPC said.

Earlier this year Mr Carney said the Bank was in discussions with Chancellor George Osborne about obtaining greater powers to regulate the buy-to-let mortgage market.

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The governor also used the FT interview to defend his policy of “forward guidance” about the path of interest rates.

In the past two years he has suggested several times that the Bank would soon start to “normalise” the base rate, which remains at 0.5%.

However, inflation has remained far below the target of 2%, prompting the Monetary Policy Committee to hold its fire.

No ‘heads-up’

“Did I know that oil was going to fall 12 per cent in the last 10 days? No, I didn’t know that,” Mr Carney said.

Neither, he added, had the Chinese “given me 12 months heads-up” that they would devalue the yuan. “But I will continue to try to frame as accurately as possible what’s guiding my decision process.”

The UK’s inflation rate turned positive in November for the first time in four months, official figures showed on Tuesday.

The US Federal Reserve is expected to raise rates for the first time in nearly a decade on Wednesday, but Mr Carney’s comments indicate that the UK’s central bank remains in no hurry to follow suit.

The Bank has not altered UK interest rates for the past six-and-a-half years.

Its annual survey of household finances found that almost a third of households would have to reduce spending, work more or alter their mortgage payments if rates rose by 2 percentage points without any increase in wages.

The Bank of England research said that the government’s austerity programme “has weighed on household spending, and it is likely to continue to do so”.

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This post was written by FSB News