‘Accidental landlords’ will be anyone who has had a prior association with the property, inherited it or been unable to sell it and decides to let it out.
The motivation for this turnaround is not because the government is fearful that this group of borrowers are at risk. The decision was made because the Treasury is fearful that by not implementing the letter of the EU Directive law, it will be acting illegally.
To see the consultation paper, Implementation of the EU mortgage Credit Directive, click HERE.
The Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) have already come out strongly with CML director-general Paul Smee describing the decision as ‘frustrating’. Meanwhile Paul Broadhead, head of mortgage policy at the BSA, said the move had ‘no discernible consumer benefit’.
Mortgage Solutions asked leading figures in the buy-to-let industry to share their thoughts.
David Whittaker, managing director at Mortgages for Business, said: “The number of transactions that this announcement will impact is somewhere between miniscule and negligible. But it does mean that the regulator has its foot in the buy-to-let door, so the question is; is this an isolated event?
Andy Young, chief executive of The Business Mortgage Company, said: “In isolation this will not have a huge impact on the market. “I don’t think that the market they are looking to regulate plays a big part in the whole industry.
“My concern though is how would you tell the difference between someone who has ended up being landlord because they couldn’t sell, and someone who has lived in the property and has to rent it out rather than selling it.
“As ever, the devil is in the detail. But it does make me wonder – is there a hidden agenda here? Is this stage one of more to come on the horizon? Once we start down this road I wonder where we will end up.”
Alan Cleary, managing director of Precise Mortgages, said: ” It’s no secret that I think the buy-to-let market as a whole should be regulated but this move is quite insignificant.
“It doesn’t address the issues which I think are prevalent in the market. Accidental landlords make up a small proportion of the market. I don’t think this is an attempt by the regulator to muscle into the buy-to-let sector, if it wanted to regulate the whole market then it would do, without taking pigeon steps.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “A buy-to-let is an investment, whether the property was inherited, a let-to-buy or purchased independently, and should be treated as such.
“Regulating some buy-to-let loans but not others will add another layer of cost and confusion for lenders, brokers and borrowers alike. Buy-to-let lenders already require that borrowers meet certain criteria. This includes having an income and there is a tough regime in place to prevent gaming – trying to get around the new affordability rules introduced in the Mortgage Market Review.
“Formally regulating buy-to-let is unnecessary and is not being done to provide additional protection to consumers.'”
Ying Tan, managing director of The Buy to Let Business, said: “The decision is disappointing but not wholly unexpected. The regulator has been slowly working its way around all the niche areas of the property and credit markets.
“The impact to any good broker will be small because they will have suspected regulation of some kind was on its way and will have prepared for that.
“My question is; how are they are going to monitor this? There are so many different types of accidental landlords. On one end of the scale you have someone who has never owned a buy-to-let property who ends up with one unintentionally, and at the other end you have the experienced landlord who may have sold his portfolio who ‘accidentally’ ends up with a property. Where are we supposed to draw the line?
“The very person the government and the regulator is trying to protect is the person they will be passing on the cost on to, for what is ultimately a business decision.
