Robert Sinclair: Buy-to-let traps
The decision by the Treasury to regulate buy-to-let loans where there is an “accidental landlord” is a clever sleight of hand to capture the smallest niche possible to meet the requirements of the European directive.
While it may lack total logic, it meets the legal requirements without capturing vast swathes of loans which most market participants think is best left outside regulation. Avoiding complex disclosure and affordability requirements for what are commercial transactions has to be the right outcome.
Of concern is that the regulatory activities order still captures the work of intermediaries where they are advising on an exempt buy-to-let loan. Only the introducing broker will need to be regulated, holding a consumer credit permission and meeting the suitability requirements of the consumer credit rules.
The Association of Mortgage Intermediaries considers this was never the intention of those who made the rules and is an accident of omission – this activity has not been made exempt, in line with many others, by virtue of forgetfulness, not a deliberate act. This is unintended, not conspiracy.
Ami is working to persuade the Treasury to add the required exemption to support the agreed principle that the vast majority of buy-to-let borrowers do not need the protection of the FCA blanket. The most important facet is that both intermediary and lender firms should unite in support of ensuring all parties to exempt loans sit outside the regulatory framework.
The recent Financial Policy Committee extension of loan-to-value ratios and debt-to-income ratios will provide the necessary macro controls over this market to prevent overheating.
Robert Sinclair is chief executive of Ami