Government proposes new buy to let regulations

The UK government has announced that new regulations are to be brought in that cover part of the buy to let market .

The move is an effort to comply with the EU mortgage credit directive and will focus on ‘accidental landlords’ – those who have deliberately not purchased property in order to rent it.

It means these landlords are not acting in a business capacity and so the Treasury has decided they need to be regulated.

An inherited property to let or one that was previously lived in by a borrower who is now unable to sell are examples of where the new proposed regulations would apply.

The proposed regulations will apply from March 2016 when the EU directive comes into effect, while the government intends to have the legislation ready by March 2015.

Only relevant new loans and not existing ones will be covered by the proposed legislation while a borrower declaration could be used for people to declare their business intent.

One important aspect of the proposals is that people who actively purchase in order to rent – acting in a business capacity – will remain unregulated.

The move has disappointed the Council of Mortgage Lenders, after it was initially thought that there would not be regulatory restrictions placed upon the market.

“We are hopeful that most of the impact should be modest, as much of it was anticipated and helpfully built in to the new rules in the first place,” said CML director general Paul Smee.

“It is frustrating though that, despite earlier assurances, the buy to let position turns out not to have been adequately resolved, resulting in a new proposal for regulating part of the buy to let mortgage market,” he continued.

The UK mortgage industry successfully argued against regulation for buy to let during the past year, saying it should not be regulated in the same way as residential mortgages.

As yet, the government has not undertaken an impact assessment of the proposals, and despite speculation that the impact would be small, an accurate figure remains unknown.

To see more on the regulations of the market please see another recent article from Jeni Browne.