Vince Cable: expect a further clampdown on buy-to-let

Speaking at the ASTL annual conference yesterday, Vince Cable warned of further tax measures to clamp down on the buy-to-let market and said that the economy, despite appearing healthy, is still heavily reliant on the state ‘life support system’.  

He added that the property market is unaffordable for most of the people in the UK and that the market was fuelled by Help to Buy and the lack of supply which had pushed average house prices up by £8,000.  

The lack of supply has been exacerbated by the “ludicrous position where banks will lend to individuals to purchase houses but not to (smaller builders) to build them”. He also said that while banks are now safer, there may still be systemic risks to banking.

The FCA’s Lorna O’Brien also spoke at the conference and said that bridging firms will not be immune from the Mortgage Credit Directive and that it would have a knock on effect even for unregulated firms. There was much discussion about whether the definition of bridging could be changed to 18 months to accommodate small development funding.  The MCD requirement which includes the term “transitioning to another financial arrangement for the immovable property” would imply that, where the exit is a sale, this would be caught by the MCD.

The conference also focused heavily on fraud with Jonathan Newman of Brightstone Law looking at the extent of fraud impacting the industry. He said that mortgage fraud in the UK had reached at least £1bn but that “nobody really knows the true scale of mortgage fraud as lenders do not tend to publish their fraud figures”. He argued that fraud prevention therefore needed be at the very core of every business model. He said that non-bank lenders, such as bridging firms, were key targets of fraud as they were seen as a soft touch with “softer underlying processes and lacking due diligence”, but that measures could be put in place to prevent it.

Benson Hersch, CEO of the ASTL said:

"Once again, the conference brought together some of the best minds in the industry to discuss the challenges facing one of the fastest growing sectors of the lending market.

“The conference highlighted that in order to remain at the very forefront of responsible lending; members will need to deal with issues around fraud and regulation head on. As the Greek philosopher Heraclitus once said, ‘The only thing that is constant is change’, so we must never become complacent.”