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Buy to let market may be boiling over, warns BoE chief

25 February 2016

Buy to let buy-to-let boil overBuy to let is such hot property that the market may be boiling over, says Bank of England governor Mark Carney.

Carney told MPs that he is concerned a property investment boom that has seen buy to let borrowing almost double in a year is a threat to the wider economy and that he is ready to take action to cool the market.

Buy to let has surged from taking an 8.8% slice of the mortgage pie to 14.;5% of all home loans in 12 months, he told the Treasury Select Committee of MPS.

“We think developments in the buy-to-let market have warranted heightened scrutiny and have done so for some time,” Carney said.

"As a general rule, any time you see a very sharp and sustained increase in activity in one area it at least bears heightened scrutiny.”

His fears are shared by Chancellor George Osborne, who has [pledged the Bank extra powers to put the brakes on buy to let if necessary.

Carney is waiting to see if increasing stamp duty on buy to let purchases will calm the market in April – but has promised he will take action to control borrowing if and when he has to.
Osborne has revealed he will allow the Bank to cap loan to value borrowing and order stricter affordability tests on buy to let.

In another buy to let development, a Czech Republic lender is offering self-certification mortgages to landlords.

The offer proved so popular that the firms web site crashed under the number of applications and is offline while underwriters look at a backlog of more than 4,000 applications.

The Financial Conduct Authority (FCA) has warned potential borrowers that UK consumer protection laws do not apply to the firm and that UK mortgage rules instruct lenders to check applicants can afford the repayments before offering a mortgage, even if the applicant self certifies their income.