Policymakers are scrutinising the booming buy-to-let sector for any moves by lenders to make it easier for would-be landlords to obtain loans. “However the FPC is alert to the rapid growth of the market and potential developments in underwriting standards”, it said.
“These risks come from both China and emerging market economies more broadly”, the statement said, noting that concerns in relation to Greece and the euro area had fallen since July. It is commissioning analysis on such contagion and impact of computer trading strategies.
The Bank’s Financial Policy Committee (FPC), which monitors the financial system for potentially destabilising risks, said “disorderly” swings in markets, such as those on the New York Stock Exchange in August, have so far been short-lived and without systemic consequences.
The buy-to-let boom could trigger another credit crunch, the Bank of England has warned.
Buy-to-let lending has grown by 40 per cent since 2008, 20 times faster than lending to owner occupiers. In the same period, the buy-to-let share of the whole market has risen from 12% to 16%.
“Any increase in buy-to-let activity in an upswing could add further pressure to house prices”, the financial policy committe (FPC) said.
Equally, buy-to-let landlords could fuel any fall in prices if what they get in rent fails to cover their mortgage payments. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
“We welcome today’s FPC recognition that UCITS funds already manage redemption requests by investors well, enabling them to respond to any surges in redemption requests”, said Angus Canvin, a senior adviser at the trade body.
Since then, global markets have been roiled by China’s slowdown and strains in other emerging economies.
Emerging economies have seen 90 billion US dollars (£59 billion) pulled out over the past year as their performances stutter – and with the era of cheap credit for U.S. investors coming to an end, as an interest rate rise nears.
Mr Carney said the way the scheme was run remained appropriate and “does not pose material risks to financial stability”.
Alongside its report, it published a letter from Bank governor Mark Carney to Chancellor George Osborne giving its annual assessment of the Help to Buy mortgage guarantee scheme.
“As the market continues to grow, particularly if driven by loosening of underwriting standards, the sector could pose risks to broader financial stability”.
Mitigating those risks, the FPC said that major United Kingdom banks’ core equity Tier 1 capital ratios, a measure of resilience, have risen by 1.1 percentage points in the past year to 11.9 percent, and funding spreads “rose only a little in response to market volatility in recent months”.
“The committee plays a crucial role in protecting our hard-won economic security by routinely assessing the housing market”.