The Bank of England could be granted new powers to curb growth in the “bubble” like buy-to-let housing market, George Osborne, the Chancellor, has said.
Addressing MPs, Mr Osborne said it was “very likely” the Government would allow the Financial Policy Committee – which guards against risks to financial stability – to take direct action to regulate the property market.
The new powers could allow the Bank of England’s FPC to hit landlords with extra restrictions as soon as this year.
“It’s very likely we will give powers to the FPC over the buy-to-let market,” Mr Osborne told the Treasury Select Committee.
The Chancellor has already imposed a new 3pc stamp duty “surcharge” on buy-to-let properties and second homes which is due to come into force next month.
The measure is expected to raise £3.8bn in taxes over the course of this parliament, according to the Office for Budget Responsibility (OBR).
“The measures I have taken in the last couple of fiscal events – on additional stamp duty, on changes to mortgage interest relief – have been done in the knowledge the Bank of England has concerns about a bubble emerging in this market”, said Mr Osborne.
The 10-member FPC is due to release an assessment of underwriting standards for buy-to-let borrowers next week.
Last year, the FPC – which is led by Bank governor Mark Carney – recommended that it is granted tougher powers over the buy-to-let markets in order to prevent a build-up of risks to the financial system.
Mr Carney has argued that that landlords may be more likely and to sell up whenever interest rates rise or house prices dip, setting off a cycle of falling prices, hurting other homeowners and banks.
Sir Jon Cunliffe, the Bank’s deputy governor for financial stability, has also said Britain’s buy-to-let market warranted closer monitoring because landlords were more sensitive to booms and busts in the housing market.
But MPs have already warned any new powers to curb the buy-to-let housing market could cost jobs and put a brake on growth.
Although details of the new measures are not known, they are set to limit the proportion of high loan-to-value mortgages given out in the buy-to-let sector, or cut the number of loans given to landlords who expect the rental income will only just cover their mortgage repayments.
“The Bank of England and the Financial Policy Committee have identified potential systemic risks in the large increase in the buy-to-let market”, said the Chancellor.