So far, 31 lenders representing an estimated 90% of the buy-to-let market have already adopted the statement of practice with all other members due to adopt it over the course of 2015.
The trade bodies involved include the Residential Landlords Association, the Association of Residential Letting Agents, the Association of Mortgage Intermediaries, the Intermediary Mortgage Lenders Association and the British Bankers Association (BBA).
The principles set out in the statement cover:
· Lending principles
· Information given to customers
· Customer responsibilities
· Lender responsibilities on affordability
· Handling financial difficulty
· Fraud prevention; and
· Complaint handling
To download the Statement of Practice, click HERE
Next year, from March 2016 when the ‘consumer’ buy-to-let lending framework is established under the FCA to comply with the Mortgage Credit Directive, buy-to-let lending will fall into one of three types:
· Mortgages regulated by the FCA like residential mortgages. These are when the property is either partly occupied by the borrower or let to an immediate family member
· Mortgages regulated by the FCA under the Mortgage Credit Directive Order 2015. These are “consumer” BTL as defined by the Order
· Mortgages not regulated by the FCA. These are mortgages which are predominantly for a business purpose
The statement of practice will cover any residential buy-to-let lending not otherwise covered by FCA regulation.
CML director general Paul Smee said: “Lenders know how important it is to have a transparent mortgage market, in which borrowers can have confidence, and where lending policy is both responsible and clearly understood. The new buy-to-let statement of practice reflects what responsible lenders already do and offers a clear explanation of how buy-to-let lenders operate. We hope it will make a valuable contribution to understanding the buy-to-let lending environment.”
The statement applies to all new buy-to-let lending, except where it is covered by other FCA rules.
Bob Young, chief executive officer of Fleet Mortgages, said: “This is an extremely positive development for the buy-to-let sector and one that Fleet Mortgages is very supportive of, not least because it gives a level of transparency and clarity to all regarding how lenders should operate and the responsibilities of all stakeholders. The CML should certainly be applauded for its work in this area as it sets a line in the sand for how existing – and new – buy-to-let lenders operate.”
Andrew Baddeley-Chappell, head of policy for mortgages and savings at Nationwide, said: “As the private rented sector continues to expand, it is important that the market focuses on adhering to a set of key principles that concentrate on doing the right thing for both tenants and landlords.
He added: “In a fast evolving market, it is important that the Statement of Practice also remains up to date and relevant.”
On 26 January this year, the government clarified the definition of consumer buy to let regulation, which will regulate an estimated 11% of buy-to-let lending for the first time in March 2016.
If a buy-to-let loan on a property has been bought for business purposes and for the sole purpose of letting it out, it remains unregulated. Equally, if the borrower has never lived in it and has a portfolio of properties, the loan remains unregulated.
Lenders can also confirm a loan is unregulated if the borrower signs a declaration saying they are acting wholly for business purposes and the provider has no reason to think this is incorrect.
Other exemptions to consumer regulation include properties where a portion of the property is being used as a residential dwelling for the borrower or a relative, on for example, a farm or live/work unit, or where the property is predominantly a business, like a secured loan on a bed and breakfast business, for example.
