Assetz is calling for the FSA to implement regulation, not just of buy-to-let mortgages, but of property investment as a whole in the UK.
This would prevent the widespread mis-selling that has taken place in recent years, ensure risks are properly disclosed to investors and control the marketing activities of agents and developers who misquote investment capital growth forecasts and yields to amateur buy-to-let investors. Nonetheless, a move to regulate just buy-to-let mortgage sales is a step in the right direction.
Regulation of the buy-to-let mortgage market will help to deter the activities of property clubs, mortgage brokers and solicitors who continue to package finance to minimise or eliminate investor cash deposits required and hence passing on greater risk to lenders. To achieve a more healthy market in the future, these practices need to be eliminated, and regulation is the best way to achieve this in a market that is fragmented and populated mostly by small businesses with no incentive to restrict the size of their client base to those with large deposits.
However, regulation on its own will not be enough and a comprehensive training course with corresponding qualification is the only way to bring better quality advice to investors. All individuals involved in property investment sales should pass significant tests on their mathematical and financial ability and on their understanding of the principles of property investment in all its guises.
Stuart Law, Chief Executive of Assetz, said: "We are delighted that the government continues to consult on the buy-to-let market with a view to extending new mortgage regulations to this type of residential property investment. We fully support any considered move to regulate the sector, and this is certainly a step in the right direction and if implemented well could deliver a greater willingness by lenders to lend again into the buy to let sector by reducing risks and further improving transaction transparency.
"Buy-to-let mortgage regulation could well stop speculators with no money entering the buy to let investment market and should also improve the transparency of individual transactions further. Far from impeding the recovery of the market, taking away the speculative, higher risk transactions will improve the risk profile of the sector from a lenders’ perspective. This will aid the recovery of the housing market as a whole and buy to let loan to values and interest rates will become more competitive as lenders once again view more that buy–to-let as a lower risk sector than standard home loans."
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