The European Union have set forth plans to enforce new regulations for mortgage lenders that will restrict the lending process for new buy-to-let property owners.
From 2016, lenders will be forced to apply tougher restrictions on certain buy-to-let mortgages, which at present do not have the same level of rules applied as regular mortgages.
Borrowing with the intention of letting the property isn’t stringent, as most landlords are viewed as businesses that require less supervision within the lending process than consumers. This makes it apparent as to why buy-to-let mortgages are more attractive, especially after the Financial Conduct Authority brought in stricter lending regulations for mainstream mortgage borrowing, back in April.
The Treasury says mortgage providers will need to deal with transactions on a case-by-case basis, treating some landlords as consumers and others as professional property letting businesses.
This proposed change is being criticised by many property experts, with the Council of Mortgage Lenders predicting it may lead to lenders struggling to determine differences between a client being a consumer or a letting professional.
A representative of the council says, The regulatory regime now being proposed is based not on any evidence of a need for additional consumer protection, but purely on ensuring that the European legal requirements are met.
As the market stands, property owners are given a smooth transition platform, which allows them to move steadily from resident to landlord. This may occur as a result of changing circumstances, and consumers are currently given the option to either switch to a buy-to-let scheme or pay a small premium, allowing them to rent out the property and retain the investment.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says, A buy-to-let is an investment, whether the property was inherited, a let-to-buy or purchased independently, and should be treated as such.
Regulating some buy-to-let loans but not others will add another layer of cost and confusion for lenders, brokers and borrowers alike.
Formally regulating buy-to-let is unnecessary and is not being done to provide additional protection to consumers.
