Buy-to-Let Best Practice statement will provide clarity on BTL lender operations

Published: 12/05/2015

The Council of Mortgage Lenders has published a statement of best practice, intended to direct buy-to-let loans for business purposes to ensure lending is ‘responsible and clearly understood’. 31 of the Council members have signed up and this covers 90% of the market – any other CML members who offer buy-to-let will be expected to sign up by the end of 2015.

Under these new principles these lenders must ensure that:

1. Buy-to-Let advertisements are clear, fair and not misleading
2. They have a policy setting out the factors included in affordability assessments
3. They have a policy to direct how they handle buy-to-let arrears and repossessions
4. They have a policy to document how they will try to prevent, identify and resolve fraudulent cases
5. They have a documented complaints policy

In 2016 when the ‘consumer’ buy-to-let lending framework is established under the FCA to comply with the Mortgage Credit Directive, buy-to-let lending will fall into one of three types

1. Mortgages regulated by the Financial Conduct Authority where the property is either partly occupied by the borrower or let to an immediate family member
2. Mortgages regulated by the FCA under the Mortgage Credit Directive Order 2015 – these are defined as ‘consumer’ buy-to-let
3. Mortgages not regulated by the FCA – these are mortgages primarily for business purposes.

This statement of practice will cover any residential buy-to-let lending not regulated by the FCA.

Lynne McCaffrey, Head of Property comments:

“Buy-to-Let lending is a specialist area and this initiative by the Council of Mortgage Lenders has been warmly welcomed by the lenders operating in this sector. It’s good to see that this area of lending, previously unregulated will now be governed by clear standards.

“In a similar way conveyancing services for this sector are also specialist. The conveyancing sector operates to quality standards set out by the Law Society – the Conveyancing Quality Scheme and these give buy-to-let clients (and indeed all conveyancing clients) assurance about the standards of legal service they will receive.”

Content correct at time of publication

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