View more on these topics

BoE: Buy-to-let boom could endanger UK stability


The expansion of the buy-to-let market could put the financial stability of the UK at risk, the Bank of England warns.

In its Financial Stability Report, published yesterday, the Bank says borrowers finding it easier to access credit and choosing to invest in buy-to-let pose a threat to the UK economy.

The report says: “Looser lending standards in the buy-to-let sector could contribute to general house price increases and a broader increase in household indebtedness.

“And in a downswing, investors selling buy-to-let properties into an illiquid market could amplify falls in house prices, potentially raising losses given default for all mortgages. This could be a particular concern in a rising interest rate environment, if properties become unprofitable given higher debt-servicing costs.

“Buy-to-let borrowers are potentially more vulnerable to rising interest rates because loans are more likely to be interest only and extended on floating-rate terms, and affordability tends to be tested at lower stressed interest rates than owner-occupied lending.”

The Bank says its financial planning committee will consult with the Treasury on how to build evidence of the risk to the UK, and will continue to monitor the sector closely.

According to Bank of England statistics, buy-to-let lending accounts for more than £1.2trn of the UK’s housing stock, 15 per cent of the stock of outstanding mortgages and 18 per cent of new mortgage lending.

It adds this could be further boosted by pensions freedoms but says it expects the impact to be small.

It says: “The ONS’s Wealth and Asset Survey suggests that only 7 per cent of 55–64 year olds would have both sufficient income in retirement to qualify for a buy-to-let mortgage and a DC pension pot large enough to provide a deposit of at least £20,000, which — assuming an LTV ratio of 75 per cent — would be required to buy a property worth £80,000.

“The majority of these retirees would already have had the flexibility to use their DC pension pots before the reforms were introduced, under an exclusion applied to individuals with other sources of income.”



Bank of England announces 75th month of 0.5% base rate

The Bank of England has again confirmed the base interest rate will be held at 0.5 per cent, marking 75 consecutive months without change. The Bank’s Monetary Policy Committee has also voted to keep the quantitative easing programme at £375bn, a level that has been maintained since July 2012 when it was increased by £50bn. […]


Inflation hits zero as BoE shaves growth forecasts

Forecasts for growth in the UK have been lowered by the Bank of England in its latest inflation report. The Bank says inflation hit zero in March, as previously forecast, driven by falls in energy and food prices. However, the Bank has made minor reductions in forecasts for growth in gross domestic product for the […]


Will pension freedoms spark buy-to-let boom?

Brokers say improving market conditions, regulatory shifts and new pension freedoms have combined to make the buy-to-let sector the most attractive lending proposition in 2015. A string of new entrants have either already joined the UK buy-to-let market in recent months or are planning to do so in the coming months. State Bank of India, […]


Financial services firms bemoan regulatory costs

The new Conservative Government should focus on cutting the cost of regulatory compliance, financial services firms say. According to the latest quarterly CBI and PwC financial services survey, tax stability was the second most popular concern among the industry, especially for general insurers and investment managers. Banks, investment banks and other companies, including life insurers, […]

Boosting our annuity strategies

Targeting annuity purchase in lifestyle strategies isn’t anything new but we’ve just lifted the bonnet and injected an enhancement shot into the end-point of these solutions. The recent volatility has shot short-term volatility into equity markets and painted a very turbulent backdrop but we’re also equally faced with a stressed fixed interest environment. This can […]


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. Really Sherlock? Expect loads of fraudulent apps from those who cannot achieve the necessary income multiples.

  2. John Stimpson 2nd July 2015 at 1:20 pm

    “sufficient income to qualify for buy-to-let mortgage”. Some buy-to-let lenders have no minimum income requirement whatsoever and allow terms that can extend very late into life on an interest only basis, on relatively competitive rates. I think that the last paragraph is similarly inaccurate, I am sure that the majority of those retirees with pension pots above that amount did not have full access to their pots until after April and so it remains to be seen therefore whether there will be a significant rise in buy-to-let investing as a result of pension freedoms. My gut feeling, working in the at-retirement market, is that there will be a very significant increase.

  3. Independent research suggests the private rented sector will increase to 40 – 45% of UK housing stock by 2040.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm