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CML launches buy-to-let statement of practice

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.”

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  • Phil Martin 7th April 2015 at 5:13 pm

    Dear Paul,

    I am sorry to report that there is a mistake in this article.

    It is a substantial point so I feel that I must point it out.

    You mention that “buy-to-let lending that does not involve letting to a family member or a “consumer” (inexperienced) landlord will be regulated by the FCA.”

    You meant to say that “does involve” rather than “does not involve”.

    ie: it is only Consume Buy To Let which is to be regulated.

    Kind Regards,

    Phil

    Further Reading: http://www.mortgagestrategy.co.uk/news-and-features/sectors/buy-to-let/govt-u-turns-on-buy-to-let-regulation-for-accidental-landlords/2013966.article

    https://www.fca.org.uk/static/documents/consultation-papers/cp15-03.pdf

    2. The legislation dictates that not all buy-to-let activity constitutes CBTL. Article 4 (2), (3) and (4)
    of The Mortgage Credit Directive Order 2015 sets this out in detail.
    (2) For the purposes of this Part, if an agreement includes a declaration which—
    (a) is made by the borrower, and
    (b) includes—
    (i) a statement that the agreement is entered into by the borrower wholly or
    predominantly for the purposes of a business carried on, or intended to be carried
    on, by the borrower;
    (ii) a statement that the borrower understands that, by signing the declaration, the
    borrower will not have the protection and remedies that would be available to the
    borrower under this Order if the agreement were a consumer buy-to-let mortgage
    contract under this Order; and
    (iii) a statement that the borrower understands that if the borrower is in any doubts as
    to the consequences of the agreement not being regulated by this Order, then the
    borrower should seek independent legal advice,
    the agreement is to be presumed to have been entered into by the borrower wholly or
    predominantly for the purposes specified in sub-paragraph (b)(i), unless paragraph (3) applies.