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Scottish rent controls could curtail buy-to-let lending

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Written by: Samantha Partington
15/01/2015

The Scottish government’s proposal to impose new rules on the private rental sector could negatively impact the availability of buy-to-let mortgages, the Council of Mortgage Lenders (CML) has warned.

The CML made the statement as part of its response to the consultation on new tenancy rules for the private rental sector in Scotland.

The trade body agreed that some parts of Scotland, namely Aberdeen and Edinburgh, had experienced above average increases in rent levels but these were exceptional circumstances where demand exceeded supply. House prices were found to be inflated in these cities for the same reason.

But the CML has urged the Scottish government to address the supply of homes in these areas as a solution and not try to enforce market rent controls.

Bernard Clarke, spokesman for the CML, said: “While there are no specific proposals for rent controls in Scotland we believe that were they to be introduced they would increase the risk for lenders. They might be deterred by concerns about whether rental income will cover the mortgage costs. And there may be other unintended consequences.

“Landlords might be discouraged, or might not be able to afford, to continue to invest in the property, or they may seek to charge a higher rent at the outset to offset the risk of lower increases over the rental term. We are concerned that controls could unintentionally restrict the quality and availability of privately rented property.”

To read the CML’s full response to the consultation click HERE.

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