Brokers and lenders continue to grapple with the Mortgage Market Review, but less than five months in, new regulation looms on the horizon.
The European mortgage credit directive has been several years in the making but it represents a new threat in the sense that the goalposts have changed. It was supposed to be a done deal – the directive was set to introduce standardised information sheets for mortgages, and cooling off periods for borrowers. Crucially, it did not concern buy-to-let following a successful lobbying effort by the UK mortgage market.
Sadly, at least some of that lobbying effort appears to have been in vain. In its wisdom, the Government has decided to bring in partial buy-to-let regulation for so-called “accidental landlords” – those who did not set out to run a rental portfolio but have ended up doing so, perhaps through inheritance or the failure to secure a sale. At this stage the plans are being consulted on but the Government expects the changes to come into effect in March 2016. It is worth pointing out the proposed regulations will only apply to new loans.
What is troubling about this latest development is that, according to the Council of Mortgage Lenders, this change has not been brought about due to fear of consumer detriment but on a technicality. Having heard the repeated assurances that buy-to-let would not be touched as part of the European directive, the mortgage industry is now suspicious that these changes pave the way for wider regulation of the overall buy-to-let market.
At a time when regulatory change is yet to bed in, these latest proposals from the Government are concerning, particularly when the impetus seems to be compliance rather than what is in the best interest of borrowers.