17:19 PM, 4th November 2011, About 12 years ago
The UK will comply with proposals to regulate buy to let mortgages if the European Union decides to include the loans in the forthcoming consumer credit directive.
Despite warnings that regulation will change the face of the market from bank and building society trade body the Council of Mortgage Lenders, the Financial Services Authority sees the ‘logic’ in the directive.
The CML has argued for some months that buy to let loans should remain outside the directive because the borrowing is a commercial rather than consumer transaction.
However, only the UK has a buy to let mortgage market working on this basis.
Private ownership of rental property is common across Europe, but the lending is considered personal rather than for business.
Harmonising buy to let across the EU means lenders will have to underwrite the affordability of buy to let applicants instead of basing the loans on rents generated by the property.
The FSA’s head of conduct policy Sheila Nicoll said: “We are very alive to the buy to let issue. One of the challenges is that that part of the market is much more important in other member states. We are deeply conscious of the concerns around that.”
“We don’t regulate buy to let and that is a matter for the government. We see the logic of the buy to let market being regulated alongside residential.”
“We have to get over the message that one-size-fits-all is appropriate in the whole of the market. It does not necessarily work in the retail market.”
Britain is the country lobbying against buy to let regulation as part of the directive, and privately, the Treasury has already declared regulation is a ‘done deal’.
The directive is currently under discussion as a draft in the European Parliament and is expected to gain approval as EU law early next year.
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