A new statement of best practice for buy-to-let mortgage lending, published by the Council of Mortgage Lenders (CML) on 7 April 2015, has been broadly welcomed by lenders and industry bodies alike.
Endorsed by the Association of Residential Letting Agents (ARLA), the Association of Mortgage Intermediaries (AMA), the British Bankers Association (BBA), the Intermediary Mortgage Lenders Association (IMLA) and the Residential Landlords Association (RLA), the statement outlines the broad principles to which responsible BTL lenders should adhere. This includes:
- Customers’ responsibilities with regards to their decision to invest in property and their mortgage contract;
- Lenders’ responsibilities to provide clear and fair information, assess affordability and handle financial difficulty;
- What information BTL customers can expect to receive, either from their lender or through their broker;
- Best practice for lenders in respect of complaint handling and fraud prevention
At the time of publication, 31 lenders had adopted the statement, representing an estimated 9 out of 10 mortgage lenders operating in the BTL market. CML expects that all of its members who provide BTL finance will adopt the statement by the end of the year.
Buy-to-let lending is split into two categories; that which comes under the remit of Financial Conduct Authority (FCA) regulation, and that which does not.
At present, the FCA regulates the sale of BTL mortgages to customers who will occupy some of the property themselves and/or will be letting some or all of the property to a close family member. Under the Mortgage Credit Directive Order 2015, certain forms of ‘consumer’ buy-to-let lending will also be brought under the scope of FCA regulation.
The CML statement of practice applies to all forms of BTL lending that fall outside of the FCA’s jurisdiction. New BTL lending (i.e. mortgages taken out after the publication of the statement) are covered by the statement in its entirety, whilst the sections on arrears management and complaint handling also apply to existing mortgages.