CML clarifies responsibility rules for buy-to-let lenders

CML clarifies responsibility rules for buy-to-let lenders

The Council of Mortgage Lenders is adopting a new statement of practice for its buy-to-let lender members, designed to provide clarity about how they should responsibly operate under the Mortgage Credit Directive.

The statement of practice will now cover any residential buy-to-let lending not otherwise covered by FCA regulation.

The statement sets out the over-arching principles that individual lenders use in determining their own lending strategy and practice in relation to: lending principles; information given to customers; customer responsibilities; lender responsibilities on affordability; handling financial difficulty; fraud prevention; and complaint handling.

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Next year, when the ‘consumer’ buy-to-let lending framework is established under the FCA to comply with the Mortgage Credit Directive, this kind of lending will fall into one of three types:

• mortgages regulated by the FCA like residential mortgages - when the property is either partly occupied by the borrower or let to an immediate family member;

• mortgages regulated by the FCA under the Mortgage Credit Directive Order 2015 - consumer buy-to-let as defined by the new rules; and

• mortgages not regulated by the FCA - predominantly for a business purpose.

The statement signposts additional information from other organisations about the responsibilities of being a landlord, and is endorsed by the Residential Landlords Association, the Association of Residential Letting Agents, the Association of Mortgage Intermediaries, the Intermediary Mortgage Lenders Association, and the British Bankers Association.

The CML stated that 31 lenders representing an estimated 90 per cent of the buy-to-let market have already adopted the statement of practice and all members who offer such mortgages are expected to adopt it over the course of 2015.

Paul Smee, CML director general, said that lenders should already know how important it is to have a transparent mortgage market, in which borrowers can have confidence and where lending policy is both responsible and clearly understood.

“The new buy-to-let statement of practice reflects what responsible lenders already do and offers a clear explanation of how buy-to-let lenders operate.”

Bob Young, chief executive of specialist lender Fleet Mortgages, welcomed the move, stating that it should help benchmark all buy-to-let lending activity, providing a level-playing field and raising standards right across the board.

“If all stakeholders within a buy-to-let transaction are clear from the very start about what is expected of them and they have all the information they need, then this should hopefully increase overall confidence in the market and develop a greater degree of best practice.”