IMLA: Basel proposals will affect Bradford & Bingley sale

However the Intermediary Mortgage Lenders Association noted that a large proportion of the assets are buy-to-let mortgages which are the subject of the latest consultation on credit risk weightings from the Basel Committee on Banking Supervision.

Peter Williams, Executive Director of IMLA, commented:

"There is a good chance the sale of these assets will be compromised as a result of proposals being considered by the Basel Committee. If implemented, these would require any buyer of the mortgages to hold almost three times as much capital against them as they would today. At this level the assets may be deeply unattractive to many investors which will reduce the revenue the sale could generate. Furthermore, if there is continuing uncertainty around capital weights for buy-to-let mortgages it may be difficult to achieve a sale at all because the market will not know how to price them.

"There is no evidence to support the Basel Committee's proposals for higher levels of capital for BTL mortgages; on the contrary, BTL loans have much lower levels of arrears than other mortgages. The Basel proposals make no sense at all, but if implemented they may well scupper the plans for the sale of the B&B portfolio and with it the Chancellor's promise of a budget surplus by the end of this parliament."

Earlier this week, the CML argued that the Basel consultation could ultimately have significant long-term effects on the UK mortgage and housing markets.

The CML says the proposals remain too blunt for a market as well regulated as the UK's and that if adopted as drafted, this could have an "unduly harsh effect on buy-to-let lending by lenders on the standardised approach".