The draft directive is aimed at tackling irresponsible lending on mortgages following property booms and busts in countries such as Spain and Ireland Under its provisions, when assessing the ability of the applicant to afford mortgage repayments, lenders will not be able to take account of rental income.
Given that almost 90% of English landlords are private individuals and that most purchases are made on the basis that the rental income will pay off the loan and its interest, this would cause serious damage to the private rented market.
The proposed Directive affects “consumers” but currently they are defined in such a way as to catch small landlords who have just a few properties.
There is no clear definition, but certainly it will embrace a part-time landlord who has bought two or three properties as his/her pension fund which constitutes the vast majority of the private rented market.
Speaking for the Residential Landlords Association, its Chairman, Alan Ward said:
“This Directive is nothing short of a disaster for housing in the UK. It would effectively kill off buy- to- let mortgages and would lead to a collapse in the market with far fewer properties being available for rent.
“It is imperative that the Directive is amended to take buy-to-let mortgages out of its scope.”
