Speaking about the forthcoming partial regulation of the buy-to-let market as part of the European Mortgage Credit Directive, in particular the focus on ‘accidental landlords’, David Whittaker of specialist brokers, Mortgages for Business, suggested full regulation was on the horizon.
Whittaker said: “I wouldn’t welcome earlier regulation of buy-to-let but it will probably happen at some point in the future for an event that will probably surprise us all. The regulator have been quite clear in their view – whilst the Treasury is obliged to follow the European Directive on two minor events of buy-to-let regulation, it’s very much the law of unintended consequences (it will affect one in 10,000 transactions), [but] there’s currently not any appetite from either the FCA or the Treasury to put the foot further inside the door of the buy-to-let camp.
Now while buy-to-let currently represents 12/13% of gross lending, that probably seems a logical explanation but if buy-to-let grows to the volumes some are predicting in the years ahead becoming 25/30% of the market, then you couldn’t have 70% of the market regulated and 25/30% of it, not. So it’s inevitably going to happen at some point...I just hope that we all behave ourselves sufficiently well not to give the regulator the reason or the excuse to hasten the day of regulation.”
Alan Cleary of Precise Mortgages had a more robust view on regulation of the sector.
He said: “I would regulate the crap out of buy-to-let. I’ve got the same view I had in 2004 – that’s not so much about lenders or brokers misbehaving but for consumer protection. The buy-to-let market [already] acts like a regulated market; all the lenders treat it as regulated so the market’s sort of regulated already, but for me, it’s about [ensuring] consumer protection.”
Whittaker suggested that before statutory regulation could be introduced, there needed to be a focus on a proper definition of ‘amateur’ and ‘professional’ landlords so that protection could be given.
“There was a rush in February 2010 to shove buy-to-let and second charges into regulation as a regulated mortgage product and perhaps the only one thing that all sides could agree upon was the necessity to find what would represent an amateur landlord, what would represent a professional who, frankly, makes his or her own business decisions and lives and dies on the basis of those decisions. No defining line was agreed.”
Whittaker said there was no need for an ‘unseemly scramble’ for regulation as had been the case in February 2010 and urged all parties to take their time to ensure agreement on definitions of landlords and the protection they required.