Bank of England monitoring buy-to-let sector
The Bank of England has said that it is keeping an eye on buy-to-let mortgages but that ﻿it is not necessary to make alterations to regulations at the present time﻿. "However, the FPC is alert to the rapid growth of the market and potential developments in underwriting standards" it said. The Bank of England has previously requested that it be granted additional powers to intervene in the sector, which the finance ministry is still considering.

LONDON, Sept 25 (Reuters) - Bank of England policymakers said on Friday they were keeping a close eye on buy-to-let mortgages and fragile financial market liquidity, but judged there was no need yet to change regulations. Risks to Britain's financial stability had risen over the past three months, driven by developments in China and other emerging markets, though British banks' resilience had also improved, the central bank's Financial Policy Committee said. "Overall, the FPC judges that the outlook remains challenging. While the resilience of the financial system has continued to improve, downside risks have risen," it said in a statement. The BoE said house price inflation looked set to rise further, and continued to monitor so-called buy-to-let mortgages used by small landlords to purchase property to rent out. "The FPC judges that there is, at present, no immediate case for action in the buy-to-let mortgage market. However the FPC is alert to the rapid growth of the market and potential developments in underwriting standards," it said. The BoE has asked for formal powers to intervene in the sector, which Britain's finance ministry is considering. The BoE gave a clean bill of health to the government's scheme to help first-time buyers purchase homes, saying it did not pose a risk to financial stability and there was no need to change its terms. In its last report three months ago, the FPC focussed on the risks posed by Greece's worsening debt crisis. Since then the situation has eased, while concerns about steep share price falls in China have intensified. Central bankers worry that events like a rise in interest rates could trigger disorderly selling -- a "taper tantrum" -- in bond markets. That happened when the United States began to phase out its programme of bond buying late in 2013. The BoE raised concerns about automatic trading and said it would study this further and report back in December. December will also bring the results of the BoE's annual stress test of British banks, which the BoE said it would use to decide whether to change the counter-cyclical capital buffer currently set at zero, which varies banks' risk buffers over the course of a business cycle. Markets have pushed back expectations for a BoE rate rise to the tail end of next year, due to emerging market risks and a delay in the U.S. Federal Reserve raising rates, but many economists believe rates could still rise early next year Banks say dwindling liquidity is partly due to tougher capital charges on their trading activities, making it far costlier to hold bonds for trading, though BoE chief economist Andy Haldane said last week this was not the whole reason. (Reporting by David Milliken and Huw Jones; ((uk.economics@reuters.com; +44 20 7542 5109)))