Buy to let mortgage regulation ‘logical’, warns the FSA
By Simon Thompson
Buy to let mortgage regulation looks inevitable as financial watchdogs admit the proposal is ‘logical.’
Banks and building societies have lobbied long and hard against the proposal under the European Union consumer credit directive but seem ready to surrender the fight.
Rallying under the banner of the Council of Mortgage Lenders, the UK buy to let market has tried to persuade politicians in Europe that the private rental market in Britain is different from that across the continent.
The trouble is no one seems to care and no one is listening.
Many countries have thriving buy to let markets - but the borrowing is ruled personal rather than a business transaction.
UK lenders claim buy to let is a business - despite HM Revenue & Customs treating profits and gains as investment income.
Switching buy to let to consumer borrowing in the UK means lenders will have to underwrite the affordability based on the income of investors rather than on rent from a property.
The CML sulks that this means less lending and higher costs for lenders.
For borrowers, the new affordability rules will rule many landlords out of the market and possibly open the way for corporate investors.
The FSA's head of conduct policy Sheila Nicoll said: "We are very alive to the buy-to-let issue. One of the challenges is that that part of the market is much more important in other member states. We are deeply conscious of the concerns around that."
"We don't regulate buy to let and that is a matter for the government. We see the logic of the buy-to-let market being regulated alongside residential."
"We have to get over the message that one-size-fits-all is appropriate in the whole of the market. It does not necessarily work in the retail market."
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