Buy-to-let mortgages excluded from EU laws

by Sarah Ashcroft

Buy-to-let mortgages have been exempt from tough new loan regulations from the European Union.

The Council of Mortgage Lenders (CML) is pleased with the announcement after a long campaign to get the EU to recognise landlord mortgages as commercial loans rather than residential or private borrowing.

As a result the European Parliament's ECON committee agreed to leave buy-to-let mortgages out of the derivative called credit agreements relating to residential property (CARRP).

"We're pleased to see that many of the long standing issues we have been lobbying on have reached a positive outcome for the UK. So for example, the UK would be able to exempt buy to let from the directive," said a CML spokesman.

"However, some provisions have been included which only emerged at a late stage of negotiations but which may not have had their full implications considered and we will continue to work on these issues as the directive goes into its next stage of discussions."

The move is important as inclusion in the directive would have seen landlord loans underwritten in the same way as private mortgages.

As a result, banks and building societies would only take the landlord's income into account rather than the potential rental income on the property.

The UK was likely to be worst affected by the plans as it has a thriving private landlord industry, unlike other EU countries which mainly see landlord loans taken out my companies.

As the housing market has slumped in the UK, there has also been a rise in the number of unintentional landlords.

These are people unwilling or unable to move due to the depressed housing market and who look for people who need to rent a room to help cover the rent or let their whole house for the first time.

However, unintentional landlords are unlikely to be affected by the changes as they will have a private mortgage already.

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Published on: June 13, 2012

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