B2L should always have been regulated.
Posted on June 6th 2009
Should buy to let be regulated or not regulated? That is a question that has been rumbling on since Mday and I still have the same view now as I did then. In my opinion BTL should always have been regulated as to not regulate it was in effect to create a sub class of borrower. The argument that BTL is a commercial transaction carried out by professional investors was a flawed counter argument. As a result of the readily available affordable credit plus the fact that it was not regulated, many keen amateurs have jumped on the band wagon and some have ended up with sizeable portfolios that are now underwater. Exact has assessed over £4bn of specialist loans on behalf of investment banks and hedge funds and there is no doubt that a significant spike of arrears in BTL is caused by a relatively few individuals. The problem does not just stop with the lender or even the borrower because there is often a tenant in the property who in most cases has been paying the rent in ignorance of the problems and may well as a result of the arrears end up being evicted from the property. From the governments point of view there is little difference between a homeowner being repossessed and a tenant being evicted, the end result is often somebody in need of some form of benefits. The FSA has already stated that it is looking at whether to regulate the BTL market so I am sure we will see a number of interesting developments over the coming months.
