Accidental landlords could soon find it impossible to switch their mortgages to buy to let agreements under a new EU directive.
EU Mortgage Legislation
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Currently, buy to let mortgages fall outside the new European Mortgage Credit Directive, so anyone who is finding it hard to sell their home or who wants to let out their home and live somewhere else can switch to a buy to let mortgage without too many problems.
Tougher Regulations Up to now lenders have been able to make a distinction between buy to let mortgages and owner-occupier mortgages because landlords are viewed as a business borrower, which means they don’t need to be supervised as closely. In the future, thanks to EU legislation lenders will now have to treat certain types of landlord mortgages as consumer lending, which means that regulations will be a lot tougher.
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.”
As a result, many lenders may choose not to lend under these circumstances because of the increased costs and regulatory difficulties involved. It is also likely to mean higher costs in all other areas of landlord lending as lenders who decide to continue lending to such clients seek to recoup the cost.