Southern Pacific Mortgage Limited (SPML) has warned of the danger of mortgage regulation by-passing investment property products.
In a letter to the Treasury, the sub-prime lender said the provision of clear, concise and comprehensive information would allow consumers to make an informed choice, “removing the most common pitfall in the mortgage process – consumers buying an unsuitable product through lack of understanding or lack of information on alternatives”.
SPML added that while such rules on the provision of product information must still allow lenders to innovate, there was a danger customers could become confused if regulatory measures were not applied across the board.
It wrote: “We feel that regulation should apply to all loans where the security is to be used for residential purposes, including those loans for the purchase of buy-to-let property. Such investment properties are increasingly being bought by ordinary individuals rather than institutions or professional property speculators.
“In addition, many owner-occupied properties are subsequently let by the owner, often where they are unable to sell for a number of months or years.
“There is considerable scope for confusion if mortgages on properties let in these latter circumstances were regulated, but those mortgages that were used to buy-to-let are not regulated.”
Stuart Aitken, SPML director of credit, said: “This should be reviewed and harmonised with statutory or self-regulation along with the current situation where certain types of lending institution are exempted from such regulation for some types of mortgage lending.”