CML to issue B2L guidance following EU mortgage directive move

The Council of Mortgage Lenders is to publish a statement of practice for buy-to-let in the coming weeks, following the Treasury’s consultation on the EU mortgage directive.

In its latest news and views publication, published yesterday, the CML again expressed its disappointment at the Government’s U-turn on the buy-to-let sector’s inclusion in the directive. It was previously expected that the EU would include voluntary mechanisms to cover the buy-to-let market without imposing regulatory restrictions.

Accidental landlords – those who have not actively purchased a property with a view to letting it – will fall under the scope of the directive as the Government feels it would be non-complicit to exclude such borrowers, despite significant lobbying efforts to exclude the sector. 

The CML has been composing a statement of practice since before the consultation, which it will publish in the coming weeks and which will likely include areas covering:

  • The responsibilities of lenders, with a commitment to lend responsibly and treat customers fairly – echoing the broad principles of fair treatment that underpin the statutory regime of mortgage regulation protecting consumers.
  • An undertaking to provide information that is fair, clear and not misleading, and in a form broadly consistent with the existing “key facts illustration” and the proposed European standardised information sheet. There should also be clear statements on fees and charges, monthly repayments and an overall cost calculation.
  • The need to make a robust assessment of mortgage affordability, allowing for conditions in the rental market, the impact of future rate rises, rental voids and arrears, and other costs. There should also be a commitment to take extra care if the borrower has an impaired credit history and to consider whether it is appropriate to lend in those circumstances.
  • The responsibilities of buy-to-let landlords, underlining their obligations to be competent and capable, and to accept that their borrowing is a commercial decision.
  • Specific responsibilities of landlords to comply with legal requirements for letting property, treat their tenants fairly, maintain and insure the property adequately, and accept the commitments associated with taking out a mortgage.

The trade body adds that due to the small proportion of borrowers brought under the regulatory scope of the directive, it is more worried about policing the new rules than the volume of people affected.

It says: “For lenders, regulation that affects some landlords, but not others, is potentially problematic – as is any lack of clarity about whether individual cases should be regulated or not.

“It is therefore the potential complexity of the proposals – rather than the number of borrowers affected – that causes most concern.”

When the Treasury published its consultation on the EU directive last week, brokers told Mortgage Strategy they felt the inclusion of accidental landlords was a precursor to wider regulation of the buy-to-let market.