The Council of Mortgage Lenders has published a statement of best practice for non-regulated buy-to-let business to ensure lending is “responsible and clearly understood”.
The trade body says 31 of its members have signed up to the principles, comprising 90 per cent of the market, and that any other member operating in buy-to-let will be expected to sign up before the end of the year.
Under the principles, lenders must ensure:
- Advertising of buy-to-let products and services is clear, fair and not misleading
- They have a written policy setting out the factors it will take into account when assessing a customer’s affordability and will make a robust assessment of affordability according to these principles
- Have, and operate within, a written policy setting out its handling of buy-to-let arrears and repossessions
- Have a written policy setting out how it will try to prevent, identify and resolve fraudulent cases
- They have a documented complaints policy which they adhere to
From next April, buy-to-let lending that involves letting to a family member or a “consumer” (inexperienced) landlord will be regulated by the FCA. Loans for business purposes will not and it is these loans for which the principles outlined today by the CML are intended.
CML director general Paul Smee says: “Lenders know how important it is to have a transparent mortgage market, in which borrowers can have confidence, and where lending policy is both responsible and clearly understood.
”The new buy-to-let statement of practice reflects what responsible lenders already do and offers a clear explanation of how buy-to-let lenders operate. We hope it will make a valuable contribution to understanding the buy-to-let lending environment.”
Nationwide head of policy for mortgages and savings Andrew Baddeley-Chappell says: ”As the private rented sector continues to expand, it is important that the market focuses on adhering to a set of key principles that concentrate on doing the right thing for both tenants and landlords.
”By focusing on quality and prudency, these principles highlight a market that is committed to sensible and sustainable lending practices, and must remain so. In a fast evolving market, it is important that the Statement of Practice also remains up to date and relevant.”