Accidental Landlord Buy to Let mortgages are now to be regulated

by Neil Patterson

13:48 PM, 5th September 2014
About 4 years ago

Accidental Landlord Buy to Let mortgages are now to be regulated

Make Text Bigger
Accidental Landlord Buy to Let mortgages are now to be regulated

The Government has changed its mind about regulating Accidental Landlord Buy to Let mortgages in a decision to now comply with the EU mortgage credit directive being brought into law March 2016.

The Treasury has stated that accidental landlords who did not make the conscious decision to purchase a property to rent it out were not acting in a business capacity, and must therefore be regulated.

This new regulation would capture properties for example that have been inherited or where a borrower has had to move and not been able to sell. Exactly how a lender will make sure it knows a property was an accidental Buy to Let in all circumstances is as yet unclear.

Currently the only Buy to Let loans that are considered to be regulated are where the borrower has an intention to live in the property at some point in the future or has a close relative living in the property.

It has been confirmed that where a property is purchased with the intention of letting it out, and therefore the consumer is acting in a business capacity, then the Buy to Let mortgage will remain unregulated as it is now.

Paul Smee, the Council of Mortgage Lenders director general 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.”accidental landlord



Comments

Neil Patterson

13:53 PM, 5th September 2014
About 4 years ago

Consumers are already tempted to tell a "white lie" about their intentions to live in it or have a family member live in it, because they do not understand the implications of non-disclosure. This is set to make the situation even more difficult.

Sam Cowen

14:04 PM, 5th September 2014
About 4 years ago

What exactly will the difference be for the mortgage holder, between having a regulated and an unregulated mortgage?

Howard Reuben CeMap CeRER

14:19 PM, 5th September 2014
About 4 years ago

Reply to the comment left by "Sam Cowen" at "05/09/2014 - 14:04":

There are regulated mortgage contracts already e.g. if a family member lives in the property etc.

The difference is not really 'felt' by the borrower except to say that the quantity of regulated BTL mortgage products is minimal, versus market for the 'mainstream' BTL mortgages.

Therefore, the pool of mortgages to select from is where the difficulty lies, so using a professional, mortgage Broker with wide reaching access to the high street and the 'challenger banks' and commercial funders will be even more necessary than now!

Howard Reuben CeMap CeRER

14:22 PM, 5th September 2014
About 4 years ago

Reply to the comment left by "Neil Patterson" at "05/09/2014 - 13:53":

"Consumers are already tempted to tell a “white lie” about their intentions to live in it or have a family member live in it," .... certainly not tempted by a professional mortgage Broker!

Using the 'right' mortgage broker means that the correct mortgage product can be sourced and implemented anyway. No need for any lies (white, black or otherwise) when the job is done properly.

But, I do take your point that borrowers who go direct to a bank and speaks with the SALESPERSON behind the counter is not always provided with the same level of advice and service and may not know exactly what to say / write on a banks application form.

Caveat emptor if going direct (or online via a comparethefurryanimal type site)!

Neil Patterson

14:28 PM, 5th September 2014
About 4 years ago

Reply to the comment left by "Sam Cowen" at "05/09/2014 - 14:04":

Hi Sam,

If you already have the mortgage I am guessing no change, but if you remortgage or purchase then you will have to go through similar compliance hoops as a residential mortgage.

It will still be a BTL as we know it but a lot fewer lenders offer regulated BTL facilities so options will be cut down drastically.

Ian Ringrose

14:39 PM, 5th September 2014
About 4 years ago

I expect that a lot more lenders will start to offer regulated BTL facilities, as there will now be a demand for them. Missing out on 0.1% of the market is no issue for a lender, but missing out on maybe half the market is!

Sam Cowen

14:39 PM, 5th September 2014
About 4 years ago

Ah. Am just in the process of moving lenders now - fingers crossed it goes smoothly!

David Lawrenson

15:27 PM, 5th September 2014
About 4 years ago

Reply to the comment left by "Sam Cowen" at "05/09/2014 - 14:04":

Hi Sam

If you read the shenenaigans of West Brom Building Society and tracker mortgages (on this site and elsewhere) that will tell you that a key difference is that lenders think that with BTL they can just effectively tear up the mortgage contract.

David Lawrenson
LettingFocus.com

David Lawrenson

15:31 PM, 5th September 2014
About 4 years ago

Reply to the comment left by "Neil Patterson" at "05/09/2014 - 13:53":

Agreed Neil, and it's my view that mortgage lenders know full well they are being"gamed" all the time especially by people who have 25% deposit but lowish incomes who apply under a BTL mortgage, but then live in the property in breach of the Ts and Cs.

Amused to see the FCA's Mr Wheatley only recently put out an alert to lenders about this. Good to see they are "keeping up" with events at their usual speed.

David Lawrenson
LettingFocus.com Consultancy


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Shelter’s Head of Research misled public on TV

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More