A few buy to let transactions are already regulated but finding a lender can be difficult. Jeni Browne, head of regulated and buy to let lending, considers whether proposed regulation of accidental landlords will scare lenders away from these types of transactions altogether.
The Treasury has announced, following a consultation, that some buy to let transactions will become regulated in 2016. To date, only a buy to let mortgage where the tenant is a member of the borrower’s immediately family has fallen into this category. Some lenders offered regulated buy to lets on this basis, including some of the bigger players, but most did not. However, those lenders who were in this market have, over the last twelve months or so, retracted from regulated lending on buy to let transactions. At this moment in time, lenders who will offer regulated buy to lets are extremely thin on the ground.
The future regulation is aimed at covering those transactions where the borrower has not set out determinedly to acquire a buy to let. This would include:
• Let to buy (where you retain your main home on a buy to let basis and move to a new main residence)
• People who have inherited a property through probate and decide to mortgage the property
My greatest concern is that the implementation of regulation will scare lenders, who currently lend on these scenarios (ie most lenders) away from these types of deals. As regulated buy to lets are practically non-existent right now, one can only hope that lenders stand true in the belief that their credit policy is robust and have the necessary infrastructure to work within the regulations which will be set later this year.
My sentiment on this regulation is mixed. As a company, we treat all of our transactions as regulated in terms of the paperwork we keep on file, our processes etc., and so we welcome any changes which bring about professional standards. The worry is that those mortgages which fall into this category become subject to certain stress tests (akin to residential lending) which would mean that in some cases, the deals just won’t work, at least in the eyes of the regulator, or worse still, lenders just bail out of these deals entirely.
More news about this is expected in October, with changes to take place in early 2016, so for now, we just have to watch and wait.
If you want to discuss this further you can call me directly on 01732 471647, or speak with any of the team on 0845 3456788.