Buy To Let Mortgages Lenders Issue Statement Of Practice

Friday, April 10, 2015
Buy To Let Mortgage Lenders Issue Statement Of Practice

Buy To Let Mortgage Lenders Issue Statement Of Practice

Buy To Let Mortgages Lenders Publish Statement Of Practice
Ahead Of Financial Conduct Authority Regulation

Buy to let mortgage companies who belong to the Council of Mortgage Lenders (CML), have issued a new statement of practice aimed at making their mortgage products more transparent for consumers as well as emphasising the responsibilities of being a landlord in the private rental sector (PRS).

The statement of practice explains how the buy to let mortgage lending framework for consumers will be established under the guidance of the Financial Conduct Authority (FCA).

This will consist of three types of lending:

  • 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” buy to let mortgages as defined by the order;
  • Mortgages not regulated by the FCA. These are mortgages which are predominantly for business purposes.

It is important to have a transparent mortgage market where lending policy is clearly outlined and mortgage lending is carried out responsibly so that borrowers can have confidence in the products on offer.

The CML also published new data showing that mortgage loans to first time buyers in January 2015 were down 27% on December 2014 figures and 14% down on January 2014, while mortgages for existing property owners were also 24% below December 2014 mortgage lending figures, equating to 17% down year-on-year.

However, the CML stated that the 18,200 buy-to-let mortgage loans approved in January 2015 represented a 6% rise on the previous month and an increase of 12% on the same month in 2014.The statement of practice issued by 31 Buy To Let mortgage lenders, who make up almost 90% of the UK market, has been endorsed by a number of landlord campaigning groups and industry bodies including:

  • Residential Landlords Association (RLA)
  • Association of Residential Letting Agents (ARLA)
  • Association of Mortgage Intermediaries (AMI)
  • Intermediary Mortgage Lenders Association (IMLA)
  • British Bankers Association (BBA)

The publication of the buy to let mortgage lending statement of practice comes as minutes from the Bank of England’s Financial Policy Committee (FPC) promised that the Bank will monitor developments closely in the UK private rented sector due to the increase in the number of interest-only buy to let mortgages being agreed. While overall mortgage lending is slightly down on the trend seen over the past two years, lending in the form of buy to let mortgages is rising.

The FPC had previously announced that it would assume powers to set limits on debt to income ratios and loan to value (LTV) ratios for mortgages as well as a so called leverage ratio framework for banks. The FPC could previously only recommend such actions, but not enforce them.

The current government have already promised that it would consult on the FPC’s recommendations for it to have new powers over the buy to let market, early in the new parliamentary calendar, with a view to building an in-depth evidence base on how the operation of the UK buy-to-let housing market may carry risks to financial stability.

This was written by Mike Clarke. Posted on at 11:30 am. Filed under Buy To Let, Landlord News. Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.