Buy to Let regulation – The EU and CARRPMake Text Bigger
Our most popular article to date in terms of both debate a viewers was the prospect of the EU regulation of buy to let and how it would affect the UK markets.
The whole issue of buy to let regulation has been hot news over the last few days with Nationwide specialist lending arm “The Mortgage Works” having released the video debate below and also the announcements from the National Landlords Association which are featured below TWP’s video.
Read more on the Credit Agreements Relating to Residential Property draft on EU buy to let regulation.
EU buy to let mortgage regulation comes a step closer
Landlords planning to refinance should set the ball rolling now as controversial proposals to regulate buy to let mortgages go before the European Commission.
The draft Credit Agreements Relating to Residential Property (CARRP) is due for first reading in committee at the European parliament on April 25.
If the draft passes committee, the full parliament still has to vote on implementation later this year.
Passing into law will mean buy to let mortgage applications are considered for approval in the same way as standard home loans.
The issue throws up severe financing problems for landlords –
- Banks and building societies may have to restrict loan to value on interest only lending
- Borrowing would be restricted by the landlord’s other income and would not be calculated on rents coming in from tenants.
The directive has little or no effect on buy to let lending in other countries as they either have no market or run the same way as residential mortgages in the UK.
The buy to let lender trade body, the Council of Mortgage Lenders and the Association of Mortgage Intermediaries, which speaks for brokers, have both protested long and hard against the proposals.
Both argue that buy to let in the UK operates as commercial borrowing and should continue to be assessed in that way.
Nevertheless, landlords should write in to their business plans that mortgage regulation and availability may change in 2013, and this could limit remortgages or loans to buy new properties.
David Cox of the National Landlords Association is quoted in Investor Chronicle as being “quietly confident” buy to let loans will be removed form the next draft.
“The bill is about protecting consumers, but buy-to-let loans aren’t consumer loans, they’re business loans.” Mr Cox said.
For landlords with plenty of equity who want to extract cash from their portfolio, the next few months could be the last chance to raise the cash to expand a portfolio.
The CARRP timetable proposes the second and final reading of the directive should take place in September – and the provisions are generally adopted in to law around 12 months later.
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