Bank of England: Underwriting standards for buy-to-let mortgage contracts

29 March 2016

This consultation paper seeks views on a supervisory statement which sets out the PRA’s proposals regarding its expectations of minimum standards that firms should meet when underwriting buy-to-let mortgage contracts.

The proposals seek to ensure that firms conduct their buy-to-let business in a prudent manner. They aim to prevent a marked loosening in buy-to-let underwriting standards and to curtail inappropriate lending and the potential for excessive credit losses.

The proposals to clarify expectations in relation to application of the SME supporting factor are aimed at enhancing the transparency and consistency of the Prudential Regulation Authority’s (PRA’s) regulatory approach.

The proposals also support the Financial Policy Committee’s ability to act from a macroprudential perspective.

The proposals are relevant to PRA-regulated firms that undertake buy-to-let lending that is not already subject to FCA regulation. The clarification regarding the SME supporting factor is relevant for firms bound by the Capital Requirements Regulation (575/2013) (CRR).

The CP proposes:

• a set of expectations for firms that underwrite UK buy-to-let mortgage contracts where the land is intended to be occupied as a dwelling on the basis of a rental agreement, in pounds sterling, regardless of whether the borrower is an individual or limited company; and
• a clarification in relation to application of the SME supporting factor on buy-to-let mortgages.

Chapter 2 outlines the PRA’s proposals. Chapter 3 considers the PRA’s statutory obligations in relation to the proposals. Appendix 1 details the draft supervisory statement.

This consultation closes on Wednesday 29 June 2016.

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Consultation paper

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