Eight in 10 brokers fear further regulation of buy-to-let after the Government’s shock move to regulate part of the sector in order to comply with the EU mortgage credit directive.
Earlier this month, the Treasury published a consultation on the directive in which it revealed “accidental landlords” – borrowers who have not actively decided to acquire a property in order to rent it out and are not acting in a business capacity – will be regulated.
Examples of cases that would come under the proposed regulation would be where a property has been inherited or previously lived in by a borrower unable to sell it and so instead decides to let the property.
The proposed regulations will apply to new loans from March 2016, when the EU directive comes into effect.
Borrowers who do actively purchase a property to then let it out, therefore acting in a business capacity, will remain unregulated.
Originally, the directive would have captured buy-to-let mortgages but the UK mortgage industry successfully argued that these mortgages should not be regulated in the same way as residential mortgages. But now the Government has U-turned on excluding the buy-to-let market from regulation, saying it needs to regulate the “accidental landlord” market to comply with the directive.
As a result, the Treasury has come under fire from the mortgage industry, with industry commentators fearing that policing the new rules will be overly complex.
A poll of 165 readers run by Mortgage Strategy over the past week shows eight in 10 fear further regulation of the sector as a result of the Treasury’s move.
The Business Mortgage Company chief executive Andy Young says: “The most worrying aspect of the change in stance on buy-to-let is that there is an ulterior motive behind it. Why would the regulators bother to include accidental landlords, who make up a miniscule portion of the market, if they did not have one eye on the whole sector? Buy-to-let is not something that needs widespread regulation because it is a business transaction.”
The Buy to Let Broker director Matthew Rowne says: “I do think the Government’s U-turn will lead to overall regulation. What that means in terms of lender activity within that sector remains to be seen.”