Buy-to-let's inclusion in European mortgage directive 'not a foregone conclusion'
A new EU directive which could change the way that mortgages are sold and approved in the UK may not necessarily affect those investing in buy-to-let properties.
The directive aims to bring in greater regulation to the mortgage markets to protect consumers and prevent lenders from approving loans to those unlikely to able to afford repayments.
However, there are fears that the extra regulatory burden will result in making mortgages more expensive and harder to get, as well as adding extra confusion to the process.
But, according to John Heron, chairman of the Intermediary Mortgage Lenders Association (IMLA), it is still possible that buy-to-let will be excluded from the legislation, something which may benefit those looking to make a UK property investment.
"It is certainly not a foregone conclusion that buy-to-let will become a regulated product under the European mortgage directive, and it remains IMLA's belief that buy-to-let should sit outside of the directive," he said at a roundtable discussion held by Mortgage Introducer.
Mr Heron argued that buy-to-let mortgages are commercial products and therefore should not be subject to regulation that is focused on the consumer.
"For example, the standard affordability model does not work with buy-to-let because it is the income generated by the underlying asset that drives a lending decision, not the borrower's ability to afford the mortgage," he said.
"In addition, regulating the mortgage product itself does not address the risk to the property investor. The success of a buy-to-let investment depends on the decisions made by the landlord, such as what type of property they invest in, where they invest and which tenant groups they target."
It follows a recent report from the National Landlords Association which found that the number of buy-to-let mortgages provided during the second quarter of 2011 grew by 25 per cent when compared to the first three months of the year.
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