IMLA comments on the PRA consultation on underwriting standards for buy-to-let mortgages

27 April 2016

Peter Williams, Executive Director of IMLA, comments on :the Prudential Regulation Authority (PRA) consultation paper :

“IMLA welcomes the opportunity to take part in the PRA’s consultation on buy-to-let (BTL) mortgage underwriting standards. It is important that lenders and regulators work together to ensure good standards in lending are maintained. The aim of making best practice an industry standard is commendable, as is the pursuit of a sustainable approach to BTL lending.

On the face of it, most lenders will have little to fear from these proposals, especially given that many have already undertaken similar assessments. However, it is important that these rules do not set minimum standards at a level any higher than is necessary to achieve a sustainable level of activity.

BTL plays a significant role in supporting the private rental sector to meet housing demand from the UK’s growing population. The consultation needs to bear in mind their potential effects on the supply of rented property and levels of rent, factors which are oddly excluded from the impact assessment. This is critical at a time when BTL is already feeling the full force of regulatory layering, with changes to stamp duty and mortgage tax relief underway and the debate ongoing about the macro-prudential controls which are still to be introduced. We assume the PRA standards and any FPC requirements will be aligned but we now have a further period of uncertainty before that can be clarified.

We would also caution against a broad-brush ‘one-size-fits-all’ approach that risks dumbing down the market. It is encouraging that the rules include some flexibility for lenders to use other disposable income in affordability assessments. To make the proposals practical, the consultation should consider how lenders will need to model landlords’ costs and also how they calculate the level of rent for affordability assessments.”

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About IMLA

The Intermediary Mortgage Lenders Association (IMLA) is the specialist trade body representing the interests of lenders who market their products primarily through brokers, rather than direct or through a branch network. IMLA provides a unique opportunity for senior industry professionals to meet on a regular basis to discuss key current initiatives and contribute actively through IMLA and other forums, such as the Council of Mortgage Lenders.

IMLA was formed in 1988 as the Association of Mortgage Lenders and was instrumental in the creation of the CML. It changed its name to IMLA in 1995. Subsequently IMLA helped bring the Association of Mortgage Intermediaries (AMI) into being and was instrumental in bringing the mortgage advisers qualification CeMAP to fruition. More information can be viewed at the IMLA website

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