New European rules will make it harder to get a buy-to-let mortgage

5th September 2014


The Treasury has U-turned on its plans to allow the buy-to-let mortgage market to remain unregulated after pressure from Europe.


Government had promised that buy-to-let mortgages would remain unregulated and therefore outside of the scope of the currently clampdown and stricter affordability criteria being placed on residential mortgages.


However, the government has now said the European Mortgage Directive means it has no choice but to impose national law on part of the buy-to-let market making it harder in some cases for landlords to acquire mortgages.


The Council for Mortgage Lenders (CML) said cases where individuals are actively working as landlords could be exempt from tougher regulation but it would apply to people who have inherited a property or in cases where a borrower is forced to rent a place out because they cannot sell it.


The Treasury is essentially making a distinction between ‘normal’ buy-to-let and ‘consumer’ buy-to-let and any clampdown on loans will start from March 2016.


Paul Smee, CML director general, said: ‘With the mortgage market review out of the way, we now enter round two of regulatory change as a result of the European Mortgage Directive. We are hopeful that most of the impact should be modest, as much of it was anticipated and helpfully built in to the new rules in the first place.


‘It is frustrating though that, despite earlier assurances, the buy-to-let position turns out not to have been adequately resolved, resulting in a new proposal for regulating part of the buy-to-let mortgage market. The regulatory regime now being proposed is based not on any evidence of a need for additional consumer protection, but purely on ensuring that the European legal requirements are met.’


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