Buy-to-let boom could lead to risks
By |Published On: 25th September 2015|

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Buy-to-let boom could lead to risks

By |Published On: 25th September 2015|

This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.

The Bank of England has warned that the booming buy-to-let market in Britain could be a threat to the wider financial stability.

A report from the Bank’s Financial Stability Committee has concluded that buy-to-let mortgage lending had the potential to cause a housing boom and bust.


In the sector, lending has risen by 40% since the beginning of 2008. The Financial Stability Committee stopped short of calling for any intervention by the government or calling for any regulations to slow this process.

‘The FPC is alert to the rapid growth of the market and potential developments in underwriting standards,’ the committee said. ‘As the market continues to grow, particularly if driven by loosening of underwriting standards, the sector could pose risks to broader financial stability, both through credit risk to banks and the amplification of movements in the housing market,’ said the committee.[1]


A 40% increase in the outstanding stock of buy-to-let mortgage lending since the beginning of 2008 is in comparison to a rise of just 2% in owner-occupier mortgage lending. In terms of overall mortgage lending, the share of buy-to-let rose to 16% from 12% in 2008.[1]

Buy-to-let landlords are much more likely to sell up should there be a significant drop in property prices, according to the bank. In addition, it feels that a similar effect could occur if prices were to rise sharply.

‘Any increase in buy-to-let activity in an upswing could add further pressure to house prices. This could prompt owner-occupier buyers to take on even larger loans, thereby increasing overall risks to financial stability,’ the FPC stated.[1]

Buy-to-let boom could lead to risks

Buy-to-let boom could lead to risks


Reductions to the amount of tax relief that can be claimed in mortgage interest payments by buy-to-let landlords were announced by the Chancellor in this year’s summer budget.

As a result, the amount that landlords will be able to claim will be capped at the basic rate of tax, currently standing at 20%. This change will be phased in over four years from April 2017.

At present, the FPC said that no intervention was required in the Help to Buy scheme, which sees the Government secure part of a low-deposit home loan, as it poses no risk to stability.




About the Author: Em Morley (she/they)

Em is the Content Marketing Manager for Just Landlords, with over five years of experience writing for insurance and property websites. Together with the knowledge and expertise of the Just Landlords underwriting team, Em aims to provide those in the property industry with helpful resources. When she’s not at her computer researching and writing property and insurance guides, you’ll find her exploring the British countryside, searching for geocaches.

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