Bank of England to have new powers to protect future of property market

The Bank of England has been given new powers by the government, which it is believed will help the central bank protect the market as a whole against risky lending practices in the buy-to-let market.

Its Financial Policy Committee (FPC) will be tasked to extend its reach into the rental market mortgage sector, where it will be expected to continue with its practices of identifying, monitoring and taking action to remove or reduce systemic risks that could put the PRS as a whole, and even property in general, at risk of falls in the future.

In the new year, the government has said that the FPC will have the power to implore the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) to put limits on buy-to-let mortgage lending for lenders when it comes to things like loan to value mortgages to ensure that they are not lending in risky ways.

In what will be a welcome yet unusual move, the government has given a nod to how beneficial buy-to-let landlords are to the economy in the UK in general, stating that they have a real role to play in the housing market, providing accommodation for people who are trying to get onto the housing ladder in the future.

However, it was also noted that there are risks that come with buy-to-let lending, and the FPC wants to have the power to use its tools to protect the market in the same way it already does for the residential sales sector.

Speaking of the move, chancellor Philip Hammond said: “It is crucial that Britain’s independent regulators have the tools they need to keep our financial system as safe as possible.

“Expanding the number of tools at the Financial Policy Committee’s disposal will ensure that the buy to let sector can continue to make an important contribution to our economy, while allowing the regulator to address any potential risks to financial stability.”