Fair Rents (Scotland) Bill or Artificial state manipulation of free market rent?10:34 AM, 6th November 2020
About 4 weeks ago 36
The Council of Mortgage Lenders is not commenting on news that a major battle over regulating buy to let mortgages with European policymakers is lost.
Reports suggest lobbying by the CML and Association of Mortgage Intermediaries (AMI) has failed and a new European Directive on Credit Agreements Relating to Residential Property will include buy to let finance.
The Treasury seems to have leaked that regulating buy to let mortgages is a ‘done deal’ according to trade news site Mortgage Introducer.
Banks and building societies have argued against the proposal because buy to let in the UK is considered as commercial finance with a different set of consumer credit responsibilities than those required for individuals buying a home.
If the EU directive is carried and buy to let lending is regulated, then landlords will be subject to the same lending criteria as residential borrowers. The regulations are currently in draft and are moving through the EU law making process.
This means lenders will have a duty to make sure that borrowers can afford their loan repayments, which could mean restrictions on lending because personal disposable income will have to be considered as well as rental income.
Robert Sinclair, director of AMI, told Mortgage Introducer: “We’re trying to keep buy to let out of the directive. This could mean individuals set up as an incorporated company and invest in buy to let not for personal use. Those are much more sensible guidelines to take and I think from discussions with Treasury this makes common sense.”
Other European countries do not have a separate buy to let mortgage market like the UK – they are lumped in to the residential market or offered as corporate finance.
The directive also includes wider ranging consumer protection and opening up the UK residential mortgage market to pan-European lenders.
The CML has also argued strongly against pulling down lending barriers – but many see this as good for the market as European lenders often offer cheaper mortgages.
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