In reality, this move to regulation for a remortgage is likely to have little material impact, according to Alex Hammond, head of marketing and communications for Kensington.
He says many lenders already apply a similar approach to buy-to-let and their regulated residential mortgages to ensure consistent standards.
Paul Clampin, chief lending officer of Landbay, says the only changes we can be certain of at this stage in terms of lending process are within the initial buy-to-let mortgage application process.
Lenders will be required to identify consumer buy-to-let mortgage needs via a number of questions.
While the infrastructure that sits behind any buy-to-let loan classified as consumer buy-to-let will be radically different after March next year, the Building Societies Association’s head of mortgage policy Paul Broadhead says alterations have already been made to accommodate how buy-to-let mortgages are typically underwritten and apply to the provision of pre-contractual information in general terms, rather than requiring the form of the European Standardised Information Sheet (ESIS).
Bob Young, chief executive of Fleet Mortgages, says that given the preparation already going on in the market, he does not expect regulation to result in “significant changes” for consumer buy-to-let deals.
Lenders that already comply with the Council of Mortgage Lenders buy-to-let code will find it is closely aligned to the regulatory requirements. However, Mr Young added that in the future we may see targeted individual landlord products, if lenders decide to focus marketing on the accidental landlord market.
In terms of other potential changes to consumer buy-to-let, in April 2015 the government passed legislation granting the Financial Policy Committee powers of direction over loan to value (LTV) and debt to income (DTI) ratio limits for owner-occupied mortgages.
This enables the FPC to direct, if necessary to protect and enhance financial stability in the UK, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) to require regulated lenders to place limits on owner-occupied residential mortgage lending by reference to LTV and DTI ratios.
The original consultation for extending the FPC’s powers also included powers to limit interest coverage ratios (ICRs) in respect of buy-to-let lending.
When the powers of direction over residential mortgages were introduced, the Bank of England noted that HM Treasury intended to consult separately on these powers later in 2015.
However, despite the FPC persistently warning of the dangers posed buy buy-to-let – in its September Financial Stability Report it noted the growth of the buy-to-let market and the threat this posed to financial stability – the consultation promised by the Treasury on extending the FPC’s powers of direction to buy-to-let has yet to materialise at the time this guide was produced.
Mr Young points out that just because the recent review of the buy-to-let sector by the FPC stated there was “no immediate case for action in the buy-to-let market” does not mean this position will be maintained.
“That doesn’t of course mean this won’t change in the future, indeed the FPC went on to say it ‘is alert to the rapid growth of the market and the potential developments in underwriting standards’.
“In other words the regulators are going to be keeping the sector under very close scrutiny and if they uncover evidence that it is, for example, heating the market up or there are standard slips in terms of underwriting, we can all expect them to act.”
