The majority of respondents to a survey on the effects of the Mortgage Credit Directive (MCD) expect no impact on business volumes.
A survey by Paragon Mortgages asked intermediaries how the MCD, to be implemented from March 2016, will impact the mortgage market.
The MCD changes will result in the introduction of a new class of buy-to-let lending called ‘consumer buy-to-let’. This will apply where the purpose of the loan is not “wholly or predominantly for” business purposes. Typically, in buy-to-let this is where the customer has no other rental properties, and where the application is a remortgage of a property that the borrower has previously lived in – commonly known as let-to-buy.
For 74% of mortgage intermediaries polled, let-to-buy currently constitutes no more than one in ten mortgage applications with more than half saying let-to-buy represented 5% or less of their buy-to-let business.
On the question of what impact the MCD would have on let-to-buy business, 70% of respondents thought there would be ‘no change’. A significant 17% however, felt the Directive would lead to them doing less business, while 12% felt it would lead to more business.
John Heron, managing director of mortgages at Paragon said: “Preparing for MCD represents a significant investment for most lenders and intermediaries. The view of industry bodies such as IMLA (Intermediary Mortgage Lenders Association) however, is that the changes are likely to be of little benefit to consumers and landlords alike.
“The new classification of Consumer buy-to-let is a case in point, with the new regulations covering only a small proportion of buy-to-let lending the real risk is that many lenders will not bother with this class of buy-to-let at all.”