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Buy to let mortgage lenders are sighing with relief after the European parliament voted to exclude landlord loans from tough new lending rules.
The UK’s Council of Mortgage Lenders (CML) has campaigned long and hard for buy to let to be treated as a commercial loan rather than a residential mortgage, which was the initial thrust of the
European directive on credit agreements relating to residential property (CARRP).
After intensive lobbying, the European Parliament’s ECON committee voted to leave buy to let lending outside of the directive.
“We’re pleased to see that many of the long standing issues we have been lobbying on have reached a positive outcome for the UK. So for example, the UK would be able to exempt buy to let from the directive,” said a CML spokesman.
“However, some provisions have been included which only emerged at a late stage of negotiations but which may not have had their full implications considered and we will continue to work on these issues as the directive goes into its next stage of discussions.”
CARRP is aimed at implementing a Europe-wide mortgage policy, but UK lenders claimed this was unfair on buy to let landlords as the UK market differs significantly from the rest of Europe.
In most European countries, the buy to let market is either fledgling or developed through lending to companies rather than individual investors.
UK residential mortgages will come under the CARRP rules.
As a result, mortgage lenders will have to strengthen underwriting for loans, offer a cooling off period to borrowers and will have less power to repossess properties if homeowners fall in to arrears on mortgage repayments.
“Parliament has given a qualitative breakthrough regarding the initial text. We now have more ambitious legislation which establishes the international golden standards bringing in the principles recently adopted by the Financial Stability Board”, said the directive’s main champion Antolin Sanchez Presedo after the vote.
“We introduced a new chapter on financial education, strengthened information to consumers, established a reflection period and the possibility to receive good advice as well as fair principles for crisis situations.”
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