No. The Treasury considers that, in most cases, buy-to-let landlords make an active decision to\u00c2\u00a0 become a landlord, an activity for which they will receive an income and for which they will be taxed\u00c2\u00a0 as a business. As such, the Treasury does not consider that lending to these borrowers should be\u00c2\u00a0regulated in consumer terms.<\/p>\n
The Treasury considers that, to meet the requirements of the Directive, it is necessary to put a\u00c2\u00a0regulatory framework in place for those cases where borrowers are not making an active decision to\u00c2\u00a0acquire a property to become a landlord, and where they do not seem to be acting in a business\u00c2\u00a0capacity (“consumer” buy-to-let). Examples might include cases where the property has been\u00c2\u00a0inherited, or previously lived in by the borrower, but the borrower is unable to sell it and so lets it\u00c2\u00a0instead. The proposed new regulation will only apply to relevant new loans (not existing loans), and\u00c2\u00a0not until March 2016.<\/p>\n
The Treasury’s consultation paper states that: “in many cases lenders will be able to establish this\u00c2\u00a0 through their underwriting processes. But the draft legislation also allows firms to rely on a borrower\u00c2\u00a0 declaration, confirming that they are acting as a business, as long as the lender does not have\u00c2\u00a0 reasonable cause to suspect that the customer declaration is incorrect.”<\/p>\n
Both the Treasury and the CML believe that the proportion of buy-to-let mortgage transactions\u00c2\u00a0falling within the scope of the proposed regulatory framework would be small. However, the Government has not yet undertaken a detailed impact assessment. Its consultation paper says it would value views from respondents as to how many transactions may fall within the framework.<\/p>\n
Government legal opinion is now that it would be unlawful under the Mortgage Credit Directive to exempt all buy-to-let lending from the UK’s statutory regulatory framework. This opinion has only emerged since the Directive was finalised.<\/p>\n
No. This decision has not been driven by any assessment or evidence of consumer detriment. It is purely a technical interpretation of what the Government believes is required legally to comply with the European Directive.<\/p>\n
In addition to the Treasury’s consultation on the legislation to implement the European Mortgage Credit Directive in the UK, there will also soon be another consultation from the Financial Conduct Authority on the practical application of the framework to deliver the new requirements. The Treasury consultation closes on 30 October (16 October for the costs and benefits aspects). The Government aims to have finalised legislation by March 2015 and the new changes will formally take effect in March 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"