A consultation published last week by the Treasury regarding the European mortgage credit directive has caused confusion among lenders and could have significant implications for BTL sector.
CML's upcoming statement of practice aims to clarify how lenders should interpret this new directive.
In its consultation, the Treasury proposes to extend statutory regulation to a relatively small section of the BTL market. The group of borrowers that would be affected are those who have not actively acquired a property in order to be a landlord and do not appear to be acting in a business capacity.
The Council of Mortgage Lenders said:
“We recognise that both lenders and landlords taking out BTL mortgages have responsibilities to ensure that the market continues to work well.
“In recognition of our view that there are responsibilities for lenders and borrower landlords, and to reinforce current good practice, we have been working closely with members on our statement of practice for buy-to-let lending.”
Members will have to state annually that they agree to comply with the statement of practice. They will also need to have to agree to operate in accordance with a written complaintshandling policy, approved by a senior management committee.
The Treasury acknowledges that the majority of the UK’s 1.6 million BTL mortgages will have made an active decision to become a landlord. They have invested in property to earn an income, on which they will be taxed as a business. CML agree with the Treasury’s view that it is ‘inappropriate for these borrowers to be captured by regulation intended to protect consumers'.
The Council of Mortgage Lenders continued:
“For lenders, regulation that affects some landlords, but not others, is potentially problematic – as is any lack of clarity about whether individual cases should be regulated or not.
“It is therefore the potential complexity of the proposals – rather than the number of borrowers affected – that causes most concern.”
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