10^th Apr 2015

In all fairness the EU Mortgage Directive understands the difference between buy-to-let lending and those buying their own homes. Within the Directive it does allow member states to opt out from the buy-to-let instructions within it, so long as they re-place it with a comparable framework.

The government is going for the opt-out and will introduce a set of minimum requirements that will meet its legal obligations. It feels it is unnecessary for a conduct of regulation for the buy-to-let sector to be introduced.

The Government accepts that the majority of buy-to-let lending is for commercial reasons, so it does not fall under EU regulation changes. There is a very small percentage of borrowers who are entering into the sector for personal reasons such as, when a borrower who used to live in the property has to take on a buy-to-let agreement as they are unable to sell the home, or if the home has been inherited. 

The proposed framework will contain requirements for mortgage intermediaries to act on behalf of, or undertake activities to be enforced by the FCA (Financial Conduct Authority).

Those lenders and intermediaries who are FCA regulated will find it to be relatively simple to become registered, however those who are not will have to meet a set of requirements for acceptance.

Bridging loans and some other forms of property loans, are still exempt from the further rules implemented within the EU directive.

March 2016 is the date that the directives/reform will be introduced. The HM treasury recently stated : “The government is putting these in place now in order to give mortgage lenders and customers as long as possible to prepare for them.”