Under the Mortgage Credit Directive (MCD), buy-to-let mortgages which are not used in a business capacity will be regulated by the Financial Conduct Authority (FCA) as a consumer product.
The government has previously estimated that these mortgages will only take up a small proportion of the overall buy-to-let market when the rules are implemented in March next year.
However, managing director of Precise Mortgages Alan Cleary (pictured), believes the market could be larger than estimations published so far.
“Precise Mortgages will be in the consumer buy-to-let market and we are building the necessary system and process changes for delivery ahead of March 2016,” he said.
“We are encouraging intermediaries who wish to operate in this market to ensure they have the appropriate FCA permissions in place and we suspect that this market may turn out to be bigger than the estimates we have seen so far.”
According to a Mortgage Solutions poll of 96 mortgage professionals, just under half (49%) of respondents expect less than 10% of their buy-to-let business to be hit by the new rules.
Almost a quarter (23%) of respondents anticipate 10-30% of their business’s buy-to-let mortgages to be regulated, while 13% expect 31-50% to come under the MCD rules. A further 8% said more than half of business would be caught by the framework, while 7% said none.
Ying Tan, managing director at the Buy to Let Business, said a key challenge for brokers will be lenders’ varying interpretations of the rules.
“As an organisation we will be fully prepared post-MCD for consumer buy to let. One of the challenges is how different lenders are interpreting and defining consumer buy to let, we hope there will be uniformity across the industry to avoid unnecessary confusion.
“We expect some lenders may withdraw which may make it less competitive driving up rates. Our estimation is around 10-15% of our business will be caught within this new framework,” Tan said.
But Daniel Bailey, owner of mortgage broker Middleton Finance, said he did not expect much of the firm’s business to be hit by the rules.
“The vast majority of my buy to let business I do will not be affected by the MCD consumer framework. It will certainly be below 10%,” he said.
“My clients are existing landlords looking to add to their portfolio or new clients looking to start a buy-to-let portfolio.”