Buy-to-let housing market in BoE's sights, says deputy governor

The Bank of England is monitoring the rapid growth of Britain's "buy-to-let" property market, the central bank's deputy governor said on Wednesday.

In what some observers interpreted as a warning of possible future action, John Cunliffe told BBC radio the sector, where investors buy homes to rent out, was growing faster than the rest of the property market.

"When you find one sector of the property market growing fast ... then I think you have to ask questions about are there risks here, and you have to monitor those risks and if necessary you have to take action to curtail those risks."

In a separate interview with the Financial Times, Cunliffe said the main aim of the BoE’s macro-prudential policies was building resilience in the financial system, meaning that the direct and immediate impact of any measures would be quite small.

He estimated that a 1% increase in banks’ counter-cyclical buffers would only require an additional £10bn in capital, which in turn would increase interest rates for companies and households by just 0.05 to 0.1 percentage points.

In its Financial Stability report for December, published on Tuesday, the Financial Policy Committee highlighted strengthening buy-to-let and commercial real estate activity and the UK’s historically high current account deficit as the domestic risk factors to keep tabs on.

The FSR indicated that the level of lenders' cyclical capital buffers could be re-assessed in March. The BoE already informally requires banks to hold between 0.25 and 0.50 percentage points of capital via such cushions.

The deputy governor also said he was keeping an eye on growth in lending by banks.

"At the moment, I think it's containable at the level it's growing but it's something you need to watch," he said.