and elsewhere, such as consumer lending. 4 i will focus on property markets. buy - to - let first and foremost, within the residential property market, lending for buy - to - let has been growing strongly for a number of years. the stock of buy - to - let mortgage lending has grown at an annual average rate of 6 % since 2008. it rose by 11. 5 % in the year to 2015 q4, while the stock of lending to owner occupiers was unchanged. buy - to - let mortgages now account for 17 %, by value, of the total stock of secured lending. lending for buy - to - let has clearly been profitable. at around the start of 2016, lenders were planning to grow their gross buy - to - let lending by, on average, almost 20 % per annum over the next two years, with some challenger banks and smaller building societies planning to grow their buy - to - let books at a much faster rate. a good rule of thumb for financial stability is that when some form of credit is growing fast one needs to look very carefully at whether lenders ’ underwriting standards are slipping and at what is happening to the distribution of borrowers ’ indebtedness. the prudential regulation authority ( pra ) conducted a review of lending for buy - to - let mortgages and concluded that there was indeed some evidence of loosening underwriting standards and a possibility that this might increase. as a result, the pra board has issued a supervisory statement to clarify expectations for underwriting standards in the market. the statement includes guidelines for testing the affordability of interest payments and a minimum stressed interest rate for use in lenders ’ affordability tests. there are also substantial tax changes affecting the buy to let market. the fpc ’ s expectation is that the government ’ s changes in stamp duty and mortgage interest tax relief for buy - to - let, together with the pra ’ s actions, will probably dampen the growth of buy - to - let lending. mortgaged buy - to - let accounts for only around 10 % of all housing transactions for house purchase so the impact on the housing market as a whole may not be great. but market dynamics are difficult to predict and given the uncertainty around the impact of the tax and supervisory changes, the fpc decided to wait and see how the market reacted before considering whether to take action on buy - to - let. the committee continues to watch the buy - to -

investment banks have followed a similar trend although the decline has not been as steep as for uk banks. overcapacity, excess costs, removal of the implicit too - big - to - fail government subsidy, tighter capital regulations and restructuring costs are all contributing to reduced returns on equity in investment banking. large parts of investment banking are not meeting required returns which are estimated to be in the region of 11 % overall for a sample of uk and international banks. parts of investment banking are therefore not economically profitable. banks have made good progress on restructuring their overall balance sheet – they have cut funded assets by nearly £1 trillion since the end of 2010 – but they will probably need to shrink parts of their investment banking businesses or boost returns, for example, by increasing prices or cutting costs. variable remuneration has fallen in absolute terms in investment banking and other parts of banks but that has been offset by an increase in fixed remuneration. staff cost to income ratios for banks as a whole are similar to precrisis levels or if anything a little higher. banks ’ staff costs have not fallen anywhere near as much as shareholder returns. conduct costs have also depressed returns in investment banking as well as retail banking. indeed, looking forward, concerns about future conduct risks, generally, may also be clouding investors ’ perceptions of banks ’ prospects. the scale and uncertainty around conduct losses is notable. uk banks ’ overall misconduct costs have totalled nearly £50 billion to date – they have exceeded £10 billion per annum in each of the past four years. this uncertainty, one hopes, should fall over time. investors ’ expected returns turning to the other part of the price to book equation, expected returns, the reforms to the prudential regulation of banks since the crisis and, in particular, to the level and quality of capital required from banks has reduced the risk to investors. that reduction in risk should, all else equal, be reflected in the return investors demand. there are signs that investors have, albeit slowly, started to lower the returns they demand to reflect lower risks. banks have cut their medium - term pre - tax return on equity targets by about 3. 5 percentage points on average since 2009 – from around 15 % to around 11. 5 %. this is welcome and necessary. some of the reduction probably reflects lower risk - free rates. but some reflects the significant increase in banks ’ resilience. there may, however, be factors that are still inflating required returns beyond the levels merit