Friday, 01 April 2016 01:16

Buy to let a convenient excuse for your own failings Mr Osborne?

Another week in politics, another scapegoat for George Osborne to beat his Tory-rich stick at. A well-conceived PR coup for front page headlines or a crass attempt to cynically side-step Mr Osborne’s perpetual failings as Chancellor? The latter rings louder than Big Ben for buy to let landlords across the country and their undeniable right to think that they are being made the fall guys for tireless failures by the government to tackle the shortage in the supply of ‘affordable’ housing.

Hot on the heels of government changes to mortgage interest relief and stamp duty, it seems the Bank of England (‘BoE or The Bank’) is being called upon to score goals and the Financial Conduct Authority (‘FCA’) relegated to the subs bench in the game of regulated credit activity, which apparently buy to let mortgages no longer play in. Well, excuse us if we think the organ grinder may wonder why the monkey is controlling what is rightfully their legislative powers. It is the Chancellor’s own policies and failures that have fuelled the recent surge in buy to let housing purchases and low and behold, prudent people investing their money as a result of faith lost in the pension system.

With news that the BoE, not the FCA, are set to clamp down on buy to let lending to ‘oppress’ the booming landlord lending market amid fears over a new property crash, we have to wonder; does the government know what their own departments are responsible for anymore or indeed their own past housing policies?

In yet another paper paid for at taxpayers’ expense, the Prudential Regulation Authority (‘PRA’) said lenders will need to meet a minimum set of requirements before underwriting buy to let mortgage contracts, including an affordability test of the borrower and whether they would be able to cope with future interest rate rises to 5.5%.

Apparently, The Bank is concerned about the amount flowing into the buy to let market and its vulnerability to even a ‘small’ rise in borrowing costs. We’re a little perplexed here by ‘small’ and indeed, logic! A ‘small’ rise from 0.5% to 5.5%...Wasn’t it George Osborne’s continued austerity Budget only recently that said to keep rates on hold for longer – and his own financial watchdog suggesting rates may even fall. Meanwhile, the government’s own economic forecasts predict a cut in interest rates from the record low and this just the day before The Bank kept rates on hold for seven years in a row.

Penalising the buy to let market is reckless and wholly unjust; the fact that first-time home owners on average borrow 78% of a property’s value, compared to 70% for buy to let borrowers (Council of Mortgage Lenders data) shouts to both the government and The Bank, that buy to let borrowing is more financially sound. The very idea that landlords are borrowing as much as they possibly can simply because interest rates remain low does not stand up to scrutiny.

If some banks or lenders are over exposed, would it not be wiser to ban them specifically from issuing new mortgages until they can unwind their positions, rather than universal rules across all lenders and punishing lenders that aren't over exposed? A universal rule is much more likely to cause a crash. If George is saying that some lenders could be at risk from buy to let's, then surely the bigger problem for us all is that financial institutions are still too big to fail – eight years on and six years into his Chancellorship, he's done nothing to tackle the monumental failings of the last crash caused by greedy fatcat lenders and the government is essentially making a declaration of no confidence in the board of lenders to make decisions. If the government is going to run this sector, are we likely to see price caps on rents on the horizon?

So, where is the supposed evidence that the next housing crash will be the fault of buy to let borrowers? Where is the government’s justifiable proof that has led to this assault on landlords? Yet again, policy decisions are being made on the basis of unproven and doubtful assertions. No wonder former Royal Institute of Chartered Surveyors (‘RICS’) chair Jeremy Leaf accused the PRA of “slamming the stable door after the horse has bolted”, saying, “The changes the chancellor has made to mortgage interest tax relief and higher stamp duty for landlords will have enough of an impact on buy to let without the need for further interference from the Bank of England.”

Or, is there a more sinister reason behind George’s plan?! Shall we rewind back to 1980 when you guessed it, the Tories who again rule today, introduced the flagship right to buy policy. What that actually resulted in was a large proportion of those very houses falling into the hands of private landlords who then let them out at higher rents and a huge cost to the state in housing benefit. Fast forward to present day and the very same party has introduced a housing benefit cap. So, shall we deduce from this protracted assault that social cleansing is alive and well; that poor people who choose to vote other than Tory have no right to live where only the middle and upper classes live, yes you guessed it, right next to the very same silver-spooned MP’s who are ill-judging and imposing rules to serve their own purpose.

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