LETTINGS NEWS: Buy to Let borrowers face tougher mortgage rules


The Bank of England has called for legal powers to limit the loan-to-value ratio on new mortgages, including those for buy to let investors. Under rules recommended by the Financial Policy Committee, lenders must makes sure that no more than 15 per cent of new mortgages are given to people borrowing over 4.5 times their income. Borrowers will also be subjected to a ‘stress-test’ to ascertain their ability to repay should the mortgage rate move to three per cent above the rate in place when their loan was originally approved.

The Bank of England emphasises its role in seeking to avoid future financial crisis: about two-thirds of major banking crises are triggered by volatile housing market movements and, it says, recessions after a housing collapse are between two and three times deeper than other recessions.

The government has put the proposal to consultation but has indicated that it will grant the request for legal powers to be passed to the bank, and they are likely to become law next year.

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