Chancellor George Osborne said in a surprise announcement on Thursday that the Bank of England would be granted new powers to regulate buy-to-let mortgages.
Osborne confirmed the BoE would be given powers to curb the buy-to-let market, but did not go into specifics.
“The governor of the Bank and the FPC (Financial Policy Committee) have asked for additional powers over buy-to-let mortgages which weren’t included, and we have granted those powers,” he told the Treasury Select Committee.
The move by Osborne to extend the powers of the BoE and the Financial Policy Committee over the sector comes after he initially rejected the idea last year.
The BoE has previously warned that the buy-to-let market is a potential threat to the UK’s economic recovery.
There have been concerns that buy-to-let borrowers could be exposed following a downturn, which could hit the wider housing market and economy.
The news comes after the Chancellor announced plans to limit tax exemptions for landlords in the Summer Budget to the basic rate of tax, which is 20%.
Currently, landlords can claim tax relief on monthly interest repayments at the top level of tax they pay, meaning the wealthiest can claim as much as 45%.
In September, the BoE said it would be closely monitoring the buy-to-let sector.
The BoE previously asked for additional powers to cap the size of landlords’ mortgages as a multiple of their expected rental income in 2014.
The Bank’s Financial Policy Committee introduced regulations last year to cap riskier mortgage lending to make sure the market did not overheat.
Banks must now ensure they do not lend more than 15% of residential mortgages at more than 4.5 times a borrower’s income.
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