Accidental landlords to be regulated
The government is to bring in regulation for buy to let mortgages provided to accidental landlords in order to comply with the EU mortgage credit directive.
Accidental landlords are people who find themselves with property and opt to let rather than sell it. This can be for a number of reasons. However the most common examples are:
- When a person has inherited a property
- When a person wishes to buy a new property but cannot sell their existing one.
There has been a significant increase in the number of accidental landlords since the 2008 crash when selling property became particularly difficult. In fact accidental landlords now account for 70 per cent of the private rental sector.
However it could soon be much more difficult to use this as a ‘fall back option’. Under this forthcoming regulation lenders will start to scrutinise the affordability of accidental landlords in a similar way they do with residential borrowers. Mortgages granted to professional landlords, who purchase a property with the primary intention to let it, will remain unregulated.
Rob Denham, Head of GW LET, is unconvinced by the changes:
“I do understand the logic behind these proposals; professional landlords, for example, tend to research their purchases to check there is a strong rental market in the area and thus minimise the risk of lengthy void periods, accidental landlords who bought or inherited a property will not have considered this.
“However in reality I am not convinced the regulation of such mortgages is going to be workable. For example, when someone who inherits a property it is likely that a good chunk of that mortgage will have already been repaid and therefore the financial risks are minimal. It just feels like obstacles are deliberately and unnecessarily being placed in the way. After all, if it isn’t broke don’t fix it!”
The new regulations will apply from March 2016.
Content correct at time of publication