From early 2017, the Bank of England's Financial Policy Committee (FPC) will be granted new powers by the government to control what loan-to-value (LTV) lenders can offer for buy-to-let mortgages and what the minimum interest cover ratio should be.
The FPC has been given the green light to direct the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) to require regulated lenders to place limits on buy-to-let mortgage lending in relation to LTV ratios and interest coverage ratios.
According to the government, this will help the committee 'protect the financial system from future risks in the buy-to-let mortgage market'.
It follows a consultation which was launched by the Treasury in December last year, at a time when the BoE was warning about the impact of the sector, because of concerns that landlords would be more likely to sell if they ran into payment difficulties; in turn, the markets could be flooded with properties and affect home buyers. The government granted the FPC powers over the residential mortgage lending market in April 2015.