Mortgage blog: Reprieve for landlords as EU backs down
The buy-to-let sector has been one of the strongest parts of the mortgage market in 2013 with landlords using low-cost investment mortgages to snap up rental properties. However, new information published in the Daily Mail has revealed that buy-to-let loans were all set to be banned by new EU mortgage regulations.
Intervention from the National Landlords Association and extensive lobbying on behalf of British landlords has given the loans a reprieve.
NLA lobbying helps exempt buy-to-let mortgages from new regulations
The Daily Mail reports that "early drafts of new mortgage rules currently being approved by the European Union would have banned buy-to-let loans completely and were only reversed after lobbying by UK landlords".
This autumn, the EU is set to pass a new mortgage directive aimed at creating a single regulatory framework to govern all mortgages within the EU and the early drafts of this proposal would have outlawed buy-to-let mortgages by telling lenders that they could not take rental income into account when assessing a borrower's creditworthiness.
According to the National Landlords Association (NLA) the early drafts of the rules didn't take into account the nuances of unusual mortgage products such as buy-to-let that only exist in Britain and Ireland.
However, after "working extensively with several European Parliaments and other organisations" the NLA has helped secure a complete exemption for buy-to-let mortgages from the directive. David Cox, senior policy officer for the NLA, says: "The NLA is very pleased with the EU's decision to exclude buy-to-let mortgages from the directive. We have lobbied hard to ensure the UK's main facility for investing in property to rent can remain in place. "The private rented sector is currently the only growing part of the UK's housing market and I am certain that a mortgage directive including buy-to-let mortgages would have prohibited this."
Keith Osborne from WhatHouse.co.uk believes the rules could have had a devastating effect on the UK's mortgage and rental market: "Had these rules been passed it would have become almost impossible for a landlord to secure a mortgage on a rental property. With no access to mortgage finance it would have meant landlords could not buy rental stock, leading to a shortage of rental properties and a steep rise in rents."
The new EU mortgage directive is set to come into force this autumn and will also require all lenders to display a new APR figure on all marketing. Mortgage lenders will have to display ‘worst-case scenarios' to residential borrowers looking to obtain a loan by listing the maximum interest rate it has charged over the past two decades.
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