The committee said it is 'alert' to the rapid growth of the market and potential developments in underwriting standards and says loosening of underwriting standards could pose risks to broader financial stability, both through credit risk to banks and the amplification of movements in the housing market.
The statement continued:
"Intensified competition among lenders could lead to loosening underwriting standards in future. The FPC supports the intention of the Bank and the PRA to develop datasets needed for systematic monitoring of those standards and other terms and conditions on buy-to-let mortgage lending."
Changes to mortgage interest tax relief announced in the July Budget are likely to reduce the incentives of some investors to take on increased leverage. And there is little evidence that underwriting standards of major lenders have fallen. Less than 12% of buy-to-let lending in Q2 2015 had an LTV greater than 75%, compared to almost 40% of owner-occupier mortgage lending. The majority of buy-to-let lending further appears to be extended at interest coverage ratios of greater than 125%, evaluated at a stress interest rate of 5%.
The Treasury will later this year consult over whether to give the FPC the power to contain buy-to-let lending.
