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One of Britain’s largest landlord mortgage lenders has stepped up the pressure on Brussels not to regulate buy to let.
Paragon Group director John Heron has just returned from a trip to the European Union headquarters to lobby for buy to let to stay outside of the proposed mortgage credit directive.
If buy to let is packaged within the directive, lenders and borrowers will have the same mortgage rules imposed as on standard residential loans.
This week, UK mortgage lenders and intermediaries have joined for the first time to argue against the directive with a common voice.
Banks and building societies are campaigning vigorously through the Council of Mortgage Lenders, the British Banking Association and the Building Societies Association. They are joined by brokers from the Association of Mortgage Intermediaries and the Finance and Leasing Association.
The directive aims to equalise mortgage regulation across the European Union and to promote consumers rights across each country.
In the UK, buy to let lending is concentrated on mortgages to individuals rather than companies, trusts and other forms of ownership that are common across Europe. These entities take commercial loans which are outside the scope of the directive.
“We have had conversations with the two committees looking at the directive. I think it is safe to say there is a great deal of sympathy about the argument that buy to let is a commercial product and does not belong under the regulation of residential mortgages,” said Heron.
The main issue between UK lenders and the European Union is whether buy to let loans in this country are consumer or commercial loans.
If the ruling is they are consumer loans, lender will be forced to include factors like disposable income, and credit ratings in to underwriting borrowing. Currently, buy to let mortgages are rated on the rental returns rather than the affordability of the applicant.
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