Cameron veto may mean buy to let regulation by EU
Published 14/12/2011 Mortgage lenders are quietly furious behind the scenes that Prime Minister David Cameron’s Euro treaty veto may have scuppered their fight to block the regulation of buy to let loans.
As the dust settles on the UK’s lonely position standing in the kitchen looking on at the Eurozone party, buy to let could be one of the victims.
Lobbyists are putting a brave face on their position and hope that the veto stance will not damage their case in the corridors of power in Brussels.
Buy to let regulation is threatened under the draft European Union mortgage directive. Under the directive, buy to let becomes a consumer loan and subject to the same underwriting as a residential mortgage.
Lenders fear this will mean landlords will have to show they can afford to pay the loans on property investments from their earnings rather than projections based on the property’s rent.
Effectively, growth in buy to let would stop as few landlords could afford to finance their own homes and rental properties from their salaries. The rule would also prevent existing landlords from remortgaging.
The fight to exclude buy to let and bridging loans from the directive is led by the Association Of Mortgage Intermediaries, representing brokers, the Council of Mortgage Lenders and the Building Societies Association.
“The EU veto may make it more difficult for the UK to lobby on the European mortgage directive,” said a CML spokesman. “Our arguments, specifically against buy-to-let being regulated through the directive remain robust.”
Meanwhile, despite the diplomatic bluster in front of the cameras, the fate of the new Euro treaty to bolster the Euro and wobbly government finances in many European countries may hang in the balance.
Several countries have warned that they may face problems ratifying a new treaty through their parliaments if the wording about central control of budgets is not watered down.
The cracks in the new-found European unity are showing before a word of the new treaty has been drafted.
Stock markets in France and Germany dropped on the news, while the FTSE bucked the trend and strengthened.
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Paul Barrett says:
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14/12/2011 at 21:30
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Mark Alexander - Property118 says:
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14/12/2011 at 21:39
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Paul Barrett says:
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14/12/2011 at 21:47
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Paul Barrett says:
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14/12/2011 at 21:49
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Mark Alexander - Property118 says:
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14/12/2011 at 21:52
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shaon says:
14/12/2011 at 21:53
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Mark Alexander - Property118 says:
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14/12/2011 at 22:00
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Peter Smith says:
15/12/2011 at 11:58
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Michael Holmes says:
17/12/2011 at 15:09
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Paul Barrett says:
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18/12/2011 at 04:07
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Gareth Evans says:
20/12/2011 at 09:36
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Mark Alexander - Property118 says:
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20/12/2011 at 09:40
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Gareth Evans says:
20/12/2011 at 09:48
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Dave says:
20/12/2011 at 12:34
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Grey beard says:
11/09/2012 at 16:17
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Grey beard says:
18/02/2013 at 14:28
Leave a commentOh dear it is not looking good is it.
Effectively this situation is causing the same situation as ‘planning blight’.
This is going to possibly cause an enormous housing headache and politically it is going to give the govt a migraine!?
Election chances; not looking good presently with all those possibly bankrupt landlords and homeless tenants.
Fear not Paul, the brains in the mortgage market are already working on their “work arounds”. This might involve lending to Limited Companies with the protection of personal guarantees secured by first charge over buy to let properties held in the personal names of landlords. Loans to companies will not be affected by the proposed EU legislation but the CGT cost of transferring properties that are already owned into companies could be enourmous, hence this proposed structure which would avoid the sale of any asetts. The structure is combersome though so it’s definitely not the route of choice for lenders. I do keep my ear to the ground and network with the movers and shakers in the industry, hence my ability to share these types of secrets. Obviously I can’t name names in terms of which lenders are coming up with these schemes but rest assured my friend, buy to let doomsday will not arrive, despite what the House Price Crash posters may think. If it really was all doom and gloom do you think the likes of Santander would have entered the buy to let market recently?
Heres hoping what you say comes to pass; clearly it is in everybodies interest to ensure there is a vibrant PRS; which this EU regulation would; if enforced effectively destroy.
Possibly a business opportunity for you setting up private companies for landlords to achieve these work arounds.
What about Sharia compliant mortgages; I appreciate that is well off the wall but I think such thinking is required to beat these EU bods.
In warefare they call it asymetric don’t they?
There is an opportunity in every difficulty and a difficulty in every opportunity Paul. Let’s wait and see what happens, plan for the worst, hope for the best.
Nice one mark, keep it up. Save us from the euro twits!
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There are flaws in the facts and the thinking in this article.
Fact: There is NOT going to be a new treaty – that was exactly what Cameron vetoed. So all the lemmings that want to rush over a cliff at the Germans’ bidding will have to make a new arrangement outside the EU Treaty
Thinking: yours is that everything else will go on as before EXCEPT that all the other EU members will take revenge on the UK in other unrelated matters.
Probabilities:
1. If the new arrangement does go ahead – unlikely because it will take too long and the euro is sinking fast – then the revenge scenario is unlikely because it would increase the risk of UK leaving the EU altogether and it cannot survive financially without our money.
2. If the new arrangement does go ahead then, revenge or not, it would be untenable for UK to remain in EU and public opinion will finally revolt – and then we will be free of such manic regulations anyway.
SO be positive, don’t whine about Cameron upsetting the foreigners and say instead “The Only Way is OUT”
The problem is the EU, not the mortgage lenders reaction to it., When is the penny going to drop, we have to get out of this ridiculous organisation asap. We then won’t get all these stupid directives thrust down our throats all the time.
I agree with geeting out.
The principal underlying reason for the EU was to tie us up as nation states so much that we would never go to war with eachother again.
Such that no one ever thought that we would see a war on the European mainland again and certainly not ‘Final Solutions’ etc…………………………..The Balkans; ethnic cleansing etc, etc etc!!
The EU started with the Coal and Steel pact btween France and Germany in the 50′s .
It was a nice idea whilst it lasted but as a nation we really need to have a’Worild’ view rather than a Eurocentic one.
Britain got to be a great trading nation by having a powerful army and navy.
Now you don’t do it this way, you provide goods and services and the endeavour to market those services to the GLOBAL ECONOMY; not just Europe..
Trading with ALL parts of the world is the ONLY way the UK economy will prosper.
People seem to have forgotten that old homily, so often esposed in the 50′s and 60′s; EXPORT OR DIE
This remains more truer than it ever was; so our horizons must increase to incorporaste the whole world and not just little europe.
World economic power is shifting inexcorably eastwards; it is time the UK woke up to this new paradigm or we as a country will find ourselves more impoverished as times go on.
As an offshoot of this, a pertinent question comes to mind — If someone only owned LTV property and was expecting to buy their own residence later in life (funded by employment even) would the residential mortgage lender refuse to view the existing LTVs as covered by their rents? So in fact a person would never normally be able to buy their own/switch residence on a loan without selling all their LTVs first ??
On a more general note, wouldn’t it be ironic if the UK was the most fortunate country in being safely ‘euorolocked’ out of all the troubles and then ended up inadvertently by a trail of events being worse off than the rest of Europe.
Hi Gareth, I think I follow what you are saying. Did you meam BTL (as in Buy To Let) as opposed to LTV (Loan to Value)? All these abbreviations do us no favours do they?
Yes ! I probably did – feels early still!
Gareth, it virtually already happens! My wife and I were separated and I was living in rented accommodation whilst she was living in our mortgaged matrimonial home. Last year we divorced, paid off the residential mortgage and she had the house in settlement. Because of injuries sustained at work and my inability to guarantee future employment I decided that I needed some other form of long-term income so built up a small portfolio of 6 BTL mortgaged properties. At a young age of 48 and after working for the same employer for over 31 years I was gently required to retire on pension (long story and ill-health retirement with its enhancements was not an option but if the country wasn’t in the midst of financial crisis I would have been able to carry on in my position for a number more years)!
I wanted to get back on the residential mortgage ladder but suddenly found that most lenders would not consider me as I had all this good BTL debt. This was despite having more than enough loan cover on each property plus a small net income from each, as well as a guaranteed pension. I did find a few options and after a lot of frustration I have now got myself a mortgage, but if we don’t get these proposed directives put to bed then I agree with an earlier post that the private rental sector, which let’s face it accounts for a large proportion of housing stock in Britain, could suddenly disappear and cause the government even more headache and housing cost in an area that they still haven’t got to grips with.
Let’s hope that Mark’s ear-to-the-ground info is being worked at in the background as this for me and no doubt for many other landlords is meant to be a long-term investment plan.
From what I understand of the current EU stance that Cameron has taken I fully agree with his actions and on the balance of likely scenarios if the whole thing does collapse I would go down the route of getting out of Europe altogether sooner rather than later.
Fact is that the UK is in the EU and politics is the art of the possible.
This proposed buy to let legislation cannot be enacted without a 72%plus vote
under qualified majority voting system. In effect this means we must have friends within
the Council of Ministers and Cameron’s silly performance means that our friends
are very few. This legistlation if it goes through will be costly to both landlord and tenant alike.
Fact is we are in the European Union and politics is the art of the possible.
Under the qualified voting system UK has 8.5% of the vote which means we must
have “friends” to make sure that this buy to let legislation is not enacted.
Cameron’s actions of first of all leaving by the main EPP political group has not helped
and his recent silly veto has left us quite isolated when we need help.
This is simply amazing when you consider that out of 27 there are at least 23
countries with centre right governments.!
Should this legislation come about it will be a very poor day for landlords and tenants alike and a disaster for UK diplomacy.