New EU rules on buy-to-let mortgages mean homeowners and mortgage applicants will face another layer of confusing and costly bureaucracy.
Britain’s army of independent landlords – who provide a vital source of housing for thousands of tenants, often refurbishing homes which are uninhabitable – could be blocked from borrowing by the regulations that come into force in 2016.
Under current Treasury guidelines, buy-to-let mortgages are unregulated – unlike mainstream owner-occupier loans. This is because landlords are viewed as business borrowers and therefore require less supervision.
But this is all about to change. Older landlords could be locked out of loans, as age restrictions are extended from mainstream mortgages into the buy-to-let industry. Tough affordability and lifestyle information will also be required as a result of this directive.
This could cause real hardship for thousands of Britain’s so called ‘accidental landlords.’ Many of the people who let out their homes did not intend to do so when they took out their mortgage.
Normally, these would simply request that their bank move them to a landlord business loan, from their mainstream mortgage product. But EU meddling will leave uncertain banks no choice but to refuse.
Often, they have simply inherited property, moved due to work commitments or moved in with a partner and retained their property for investment purposes.
In other cases, people who are unable to sell will choose to let out their property, providing a much-needed supply of housing. These rules will result in many homes being left empty – whilst overcrowding problems worsen and housing waiting lists burgeon.
Mortgage experts fear that banks will charge a substantial fee and eye watering interest levels to facilitate switchovers. These unnecessary costs will be passed straight on to private tenants.
With household bills already rising and many homeowners under financial pressure, regulations making the mortgage market more expensive and inflexible could push some families under. These misguided rules will undoubtedly restrict the supply of homes for rent – pushing up prices as a result.
Another crucial change will hit people who live in a property – but offer a substantial part for rent as well. Currently, these borrowers are only regulated if the owner lives in more than 40% of the property, but the EU has admitted the new rules do not respect this principle.
Multi-generational homes will be clobbered by the full force of this regulation, with different generations of the same family denied the chance of sharing a home. Children who let to their elderly parents, or vice versa, may very well be denied mortgages.
At a time of rising rents and an ageing population, Europe’s actions seem completely out of touch.
The Government admitted in its own consultation document that it is ‘sceptical’ about these new rules, with the Treasury admitting it has absolutely no idea how many people will be affected. The Council of Mortgage Lenders believe these changes could hit up to 300,000 existing homeowners.
Mark Harris, the chief executive of the mortgage broker, SPF Private Clients, said that the new system would bring extra costs. He explained, ‘the decision to regulate some buy-to-let loans and not others…is bound to confuse borrowers.’
An Englishman’s home is his castle, yet Eurocrats in Brussels seem intent on taking it away. In order to stop this unnecessary, costly and confusing regulation and protect our mortgage market, we need to Get Britain Out of the European Union as soon as possible.