In its formal response to the Treasury’s consultation on whether to extend the scope of mortgage regulation to buy-to-let, the trade body argues that buy-to-let regulation would capture an inappropriate range of commercial transactions.
The CML says it is also the wrong way to address concerns about systemic risks, which are more appropriately addressed through prudential rather than conduct of business regulation.
The CML’s response says: “Fundamentally, the CML still believes that buy-to-let loans are essentially commercial transactions with an investment dimension, and should not be subject to retail mortgage regulation.
“Inappropriate regulation could further damage buy-to-let lending, which has shrunk substantially in the last two years, at a time when the government is separately promoting investment opportunities in the private rental sector.
“Extending the FSA’s scope as proposed would undermine the government’s wider housing policy.”
Michael Coogan, director-general at the CML, says: “While we support some of the proposals to extend regulatory scope, the Treasury and the FSA need to tread carefully to avoid unintended negative consequences.
“As far as buy to let is concerned, the regulatory proposals are barking up the wrong tree – for amateur property investors, poor investment advice is the issue, not the mortgage.
“The Treasury recognises that regulation has in the past dampened incentives to invest in the private rental sector.
“The proposals to extend mortgage regulation designed to protect home-owners to the buy to let sector would simply repeat this mistake.”