Brokers and trade bodies have hit out at the Government’s shock plans to regulate so-called “accidental landlords” from March 2016.
The Government has published a consultation on the EU mortgage credit directive, which proposes that “accidental landlords” – borrowers who have not actively decided to buy a property to rent it out and are not acting in a business capacity – must be regulated.
Examples of cases that would come under the proposed regulation include where a property has been inherited, or previously lived in by a borrower unable to sell it who instead decides to let the property.
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 in order to comply with the directive.
Mortgages for Business managing director David Whittaker says: “Clearly the fox is in the chicken coop. Accidental landlords are a minuscule part of the market but by keeping this element of buy-to-let within the regulatory framework, the Government gives itself the scope to implement far-reaching rules at a later date.”
The Business Mortgage Company chief executive Andy Young says: “My fear is there is a hidden agenda here and regulators may have one eye on the whole buy-to-let market.“
Association of Mortgage Intermediaries chief executive Robert Sinclair says: “In dividing the buy-to-let market by applying some artificial distinctions we are concerned that some elements may be marginalised and therefore ignored by lenders. This will not be a good outcome for consumers.
“As the Treasury has acknowledged, the Mortgage Market Review has already given the UK a mortgage regulation regime that is appropriate for our market and these new requirements will add costs with very limited industry or consumer benefits.”
Council of Mortgage Lenders director general Paul Smee says: “With the MMR out of the way, we now enter round two of regulatory change as a result of the European mortgage directive.
“It is frustrating that, despite earlier assurances, the buy-to-let position turns out not to have been adequately resolved.”