Myth-busting – Electrical Safety installations Act 202011:19 AM, 3rd August 2020
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A gang-of-five of mortgage industry trade bodies has joined forces to challenge European Union proposals for mortgages that include tougher regulation of buy to let.
The EU is pushing a draft mortgage directive through the European parliament that aims to tighten up rules for residential and buy to let lending.
The intention is to protect consumers from misleading marketing and to ensure consumers do not overcommit themselves to loans they cannot afford to repay.
The lobby group represents most major UK banks, building societies and finance companies plus the many mortgage brokers who introduce business to them.
The trade bodies are the Council of Mortgage Lenders (CML), the British Bankers’ Association, the Building Societies Association, the Intermediary Mortgage Lenders Association and the Finance and Leasing Association.
Despite a recent leak from HM Treasury suggesting buy to let regulation was a ‘done deal’, the gang is determined to pressurise the government and EU to relax the directive.
The group argues that the UK treats buy to let borrowing as commercial funding, not residential lending, which is the opposite to most other European countries.
Some industry insiders have already indicated that landlords might consider buying investment property with a company rather than as an individual if the EU makes the regulatory switch.
The lobby group is also concerned that the cost of complying with the directive will be disproportionate to the gains for consumers.
Another section of the directive also opens a pan-European market for residential and buy to let lending.
This could be good for borrowers as European banks who might enter the UK market charge significantly lower interest rates than UK banks and building societies.
“The belief is European regulation should only extend to residential mortgages advanced to consumers. Buy-to-let loans, along with lending on properties providing a combination of residential and commercial use, should be excluded from the rules,” said the CML.
“We also believe that decisions about the availability and pricing of mortgages should be made by the lender, and not based on requirements to assess the creditworthiness of customers.”
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