Liz Syms, managing director of Connect for Intermediaries, said when the MCD starts on the 21 March, without extra permission checks, both investors and lenders could find themselves at risk.
From 21 March, alongside the introduction of consumer buy-to-let regulation, business buy-to-let will no longer be regulated by the FCA as credit broking permissions are no longer required, bringing a higher risk of poor quality or fraudulent applications.
Syms said: “So technically, unqualified and unregulated advisers could be arranging buy-to-let mortgages from 21 March.”
Syms said: “Unregulated advisers will not be bound to justify the sales they make. Therefore, they may not fully research the available products in the market or record why the product meets the client’s requirements, increasing the risk of an unsuitable product being sold.”
She added that the industry needs to ready to combat this risk on all fronts.
“Landlords need to check they are working with a regulated adviser as that adviser is required to meet the minimum regulators standards of integrity and suitability. Lenders need to be wary of brokers who have avoided regulation because of issues with past quality or fraud which would pose a higher risk to the lender’s business.”
A spokesperson from the Financial Conduct Authority (FCA) confirmed that consumer buy to let will be covered but declined to comment further on the weakened regulatory position brought by European regulation.
“We will be responsible for registering, supervising and taking action where necessary against firms carrying out these consumer buy-to-let activities,” it said.
You may also be interested in the Mortgage Solutions newsletter. All the latest news, analysis and insight from the mainstream residential lending market. Including industry news, adviser business strategy tips and market commentary.