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FCA admits no definition for consumer buy to let

  • 01/10/2015
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FCA admits no definition for consumer buy to let
The Financial Conduct Authority (FCA) has admitted there is no official definition for consumer buy to let, a term introduced under legislation for the upcoming Mortgage Credit Directive (MCD).

Speaking at the Association of Short Term Lenders (ASTL) conference, FCA mortgage technical specialist Lorna O’Brien, said while there was no specific definition, there were a number of scenarios that described when borrowers could fall under this category set out in fact sheets published by the regulator.

The MCD describes a consumer buy-to-let mortgage contract as that which is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.

An audience member raised concerns that new legislation has been introduced for what many predict is likely to only be a small part of the buy-to-let sector.

O’Brien agreed that in the bridging industry, lenders were less likely to come across consumer buy-to-let customers than mainstream lenders, but added that it was still important to be aware of the changes.

Another delegate queried how much a lender could rely on a declaration signed by the borrower confirming that they were acting wholly for business purposes when purchasing a buy-to-let property.

O’Brien said lenders could rely on this except where there is a reasonable cause to suspect that this is not the case.

She said: “Firms will need to decide what level of comfort they want. I don’t think there’s any intention for you to take extra due diligence to see actually what customers up to, but if there is information in the application that makes you doubt the borrower’s intentions then there could be reason to act.”

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