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.