Mortgage blog: EU set to make buy-to-let mortgages harder to get

Posted 17 September 2014

New mortgage rules set to be imposed by the European Union will make it more difficult for UK borrowers to get a buy-to-let mortgage. The new European Mortgage Credit Directive will be implemented by 2016 and will result in certain types of buy-to-let mortgage facing tougher regulation.

The rule changes could particularly affect ‘accidental landlords’ – those people who have been forced to let their property because they can’t sell or because they have been forced to relocate for work.

Some buy-to-let mortgages face regulation when EU rules come into effect

The Treasury has warned that banks will be forced to refuse certain types of buy-to-let mortgage from 2016 in order to comply with tough new European mortgage legislation. Currently, buy-to-let mortgages are not regulated in the UK because they are considered ‘business’ rather than ‘consumer’ lending. Buy-to-lets have therefore fallen outside regulation and escaped underwriting changes in the recent Mortgage Market Review.

However, this could be set to change once the new EU rules are implemented. A new Treasury report says that under the new directive there will be circumstances in which buy-to-let lending will be viewed as ‘consumer’ lending and therefore will fall under the regulations.

The Treasury said: “There are some situations where borrowers do not seem to be acting in a business capacity. Examples of this may be where the property has been inherited or where a borrower has previously lived in a property, but is unable to sell it so resorts to a buy-to-let arrangement. In these cases, the borrower is a landlord as a result of circumstance rather than through their own active business decision.”

Banks, building societies and other mortgage experts have slammed the proposed changes. The Council of Mortgage Lenders, representing the mortgage industry, said that the regulation the Treasury now proposed “is based not on any evidence of a need for additional consumer protection, but purely on ensuring that the European legal requirements are met”. A spokeswoman added that lenders may struggle to distinguish between ‘consumer’ landlords and those who invested in buy-to-let property as a deliberate business decision.

“Faced with the increased costs and difficulties they might simply decide not to lend in these circumstances,” she said.

Keith Osborne, editor of, said: “The new rules are set to impact on certain types of landlord, particularly those people who have ended up owning a buy-to-let property through circumstance. However, these people still manage their property as an investment and so the rules should treat them the same as other landlords. The new rules will simply add extra regulation and confusion where it isn’t needed.”

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