The Council of Mortgage Lenders (CML) has confirmed that it will publish revised lending guidelines in the coming weeks, with reference to the surprise decision taken by the Treasury to regulate so called ‘accidental landlords’. The Treasury have considered the details of the EU mortgage directive, and have confirmed that anyone who currently lets a mortgaged property, despite no initial plans to do so, will now find their debt falling under the regulated sector of the mortgage market.
The CML yesterday expressed frustration relating to the sudden shift in policy, as previous assurances had been provided by the Government that there would be no penalisation for borrowers in this position. Paul Smee, the director general of the trade body said: "With the mortgage market review out of the way, we now enter round two of regulatory change as a result of the European Mortgage Directive. We are hopeful that most of the impact should be modest, as much of it was anticipated and helpfully built in to the new rules in the first place.
"It is frustrating though that, despite earlier assurances, the buy-to-let position turns out not to have been adequately resolved, resulting in a new proposal for regulating part of the buy-to-let mortgage market. The regulatory regime now being proposed is based not on any evidence of a need for additional consumer protection, but purely on ensuring that the European legal requirements are met."
The view from the Government is that by ignoring this section of the market in regulatory terms, it would be seen as a significant disregard for the EU ruling. But as the trade body confirms, tracking loans taken in this manner and managing the process of preventing the practice will be costly and challenging for all involved.
A statement issued yesterday by the CML stated: “For lenders, regulation that affects some landlords, but not others, is potentially problematic – as is any lack of clarity about whether individual cases should be regulated or not. It is therefore the potential complexity of the proposals – rather than the number of borrowers affected – that causes most concern.”
In a sector that is becoming ever more tightly regulated, the change in process should be a stark reminder for contractors looking to raise funds for a buy to let that transparency at the outset of taking a loan is more important than ever. Simon Butler, of Contractor Mortgages Made Easy said: “The expectation has been since the release of the Mortgage Market Review in April this year, that the buy to let market would be next on the list for review.
“Fears were raised at the time of the review that so-called back door buy to lets, where a property is purchased as a residential mortgage, only to be let out immediately after completion, have long been an area that the Financial Conduct Authority (FCA) wanted to rightly eradicate from the mortgage market. A leaning towards regulation makes sense in this instance, but the fear for many working in the sector is that the change in stance by the Government towards accidental landlords could open the door to wholesale regulation in the future, which could ultimately have an adverse effect on the growth for the buy to let market.”
Article By: Jon Sheilds, Media Executive at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080