The Bank of England’s Financial Policy Committee (FPC), which is responsible for spotting risks in the economy, has “noted the increasing share of interest-only mortgages in buy-to-let mortgage lending and agreed to continue to monitor developments closely.”
The committee said in their March meeting that the risk to the economy posed by the property market had not increased since the previous month.
According to the Council of Mortgage Lenders, mortgage lending in general is in decline, with gross lending in January 2015 down 15.5% since the previous year. Buy-to-let mortgage lending, however, is growing. There were 18,200 buy-to-let loans in January, up 6% from December, and up 12% from January 2014.
Last year, the FPC asked the Treasury for powers to force banks to apply recommended restrictions on mortgage lending. They would like to formally limit the debt-to-income ratios that apply to buy-to-let loans.
The Treasury agreed that the Bank needs to be able to limit the residential mortgage market in order to decrease the possibility of a boom-and-bust housing cycle, but wants first to gather evidence to determine whether the buy-to-let market poses sufficient risk.
The consultation on buy-to-let limits is to begin after the election.