EU Directive for Buy to Let mortgages
EU Directive Could Change Buy to Let Opportunities
Tougher new mortgage lending rules set up as part of the Government’s plans to adhere to the European Mortgage Credit Directive will mean that buy-to-let borrowers could face a tougher time obtaining buy-to-let finance from 2016.
As things stand currently, buy-to-let mortgages are not subject to the same regulations that apply to mainstream, owner-occupier mortgages. Those over 65 for example are able to apply for buy-to-let mortgages, and the mortgages themselves are available on an interest-only basis.
The new regulations are designed to target those who become ‘accidental landlords.’ This is defined as someone who has become a landlord through circumstance rather than design. This for instance, could be a person who intends to let a property they have previously used as their home or to rent a home that they have inherited.
The regulations have arisen because landlords have always been generally viewed as ‘business’ borrowers, needing little supervision, whereas owner-occupiers who find themselves letting, are deemed ‘consumers.’ The Treasury has stated that accidental landlords have not made the business decision to purchase a property to rent it out. As such, they are seen as not acting in a business capacity, and therefore require regulation. As a result, it’s thought that as a result buy-to-let borrowers will have to pass more compliance tests and jump through more hoops in order to borrow.
EU Member States are able to choose not to apply the entire Directive to bridging loans, so unless the UK decides to apply the directive to bridging finance, this should remain unaffected.
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