Mixed opinions on regulation of buy-to-let lending
The dramatic decline in the number of buy-to-let products over the past 18 months and the much higher deposits required to obtain a loan in the first place have opened a debate among landlords and investors as to whether the Financial Services Authority (FSA) should regulate buy-to-let lenders. According to a survey published LSL Property Services, newer landlords and investors tend to support regulation, while those landlords with more than seven years of experience are worried that an interventionist approach on the part of the government may simply exacerbate an already difficult situation.
Fully 60 percent of all landlords questioned would like the FSA to step in and offer more regulation of buy-to-let lenders—similarly to how they already regulate regular residential mortgages. But LSL’s survey also suggests that the proportion of landlords seeking more regulation is smaller among those with more experience in the business. For example, 55 percent of residential landlords with more than seven years of buy-to-let experience opposed regulation of the finance sector, mainly because they felt that this would further limit the number of loan products available to investors.
David Brown, representing LSL, noted that some professional landlords feared excessive regulation would encourage a range of brokers and lenders to leave the business. But the government is looking into the regulation of buy-to-let lending and these plans may already be in place later this year. Brown, however, noted that the FSA should remember that milder, less restrictive regulations would have a much more salutary affect than taking a “sledge hammer” approach.