Underwriting standards for buy-to-let mortgage contracts

Policy Statement 28/16 | Consultation Paper 11/16

Published on 29 September 2016

Underwriting standards for buy-to-let mortgage contracts - PS28/16

This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to the responses to Consultation Paper (CP) 11/16 ‘Underwriting standards for buy-to-let mortgage contracts’, and the final Supervisory Statement (SS) 13/16 ‘Underwriting standards for buy-to-let mortgage contracts’.

This PS is relevant to all firms regulated by the PRA that undertake buy-to-let lending that is not already subject to Financial Conduct Authority (FCA) regulation. The PRA expects regulated firms to ensure that the standards contained in the SS are adopted by other firms undertaking buy-to-let lending within their groups.

The PRA’s clarification on the small and medium-sized enterprise (SME) supporting factor is relevant to all firms within the scope of the Capital Requirements Regulation (575/2013) (CRR).

Feedback to responses

The PRA received 34 responses to the CP from banks, building societies, associations and private individuals. While respondents expressed support for buy-to-let underwriting standards, some respondents challenged specific aspects of the proposal or asked for further clarification. After reviewing the feedback received, the PRA has made amendments to the proposal for the implementation timeline and provided further clarifications.

PDFPolicy Statement 28/16

Appendix 1

Supervisory Statement 13/16

Published on 29 March 2016

Underwriting standards for buy-to-let mortgage contracts – CP11/16 

This consultation paper (CP) seeks views on a supervisory statement which sets out the Prudential Regulation Authority’s (PRA’s) proposals regarding its expectations of minimum standards that firms should meet when underwriting buy-to-let mortgage contracts. The proposals also include clarification regarding application of the small and medium enterprises (SME) supporting factor on buy-to-let mortgages.

Summary of proposals

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 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:

i) 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

ii) 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.

The supervisory statement follows a PRA review of underwriting standards in the buy-to-let sector which covered 31 firms (c.92% of the market). This review highlighted concerns about lenders’ growth plans and how they might meet them. In particular, there is a risk that firms relax underwriting standards, thus affecting their safety and soundness. The findings suggested a need for microprudential action.


This consultation closed on Wednesday 29 June 2016.

PDFConsultation Paper 11/16

PDFDraft Supervisory Statement on Buy-to-let Underwriting Standards Presentation slides

Financial Policy Committee statement from its policy meeting, 23 March 2016

Other prudential regulation releases