Buy-to-let lenders which are members of the Council of Mortgage Lenders (CML) are adopting a new statement of practice which has been published today.
It is designed to provide clarity about how responsible buy-to-let lenders operate. It reflects existing good practice and aims to ensure that there is a clear explanation of the obligations of buy-to-let borrowers on their mortgages. It also signposts additional information from other organisations about the responsibilities of being a landlord, and is endorsed by the Residential Landlords Association, the Association of Residential Letting Agents, the Association of Mortgage Intermediaries, the Intermediary Mortgage Lenders Association, and the British Bankers Association (BBA).
31 lenders representing an estimated 90% of the buy-to-let market have already adopted the statement of practice. All CML members who offer buy-to-let mortgages are expected to adopt it over the course of 2015.
The statement sets out the over-arching principles that individual lenders use in determining their own lending strategy and practice in relation to:
- Lending principles
- Information given to customers
- Customer responsibilities
- Lender responsibilities on affordability
- Handling financial difficulty
- Fraud prevention; and
- Complaint handling.
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:
- Mortgages regulated by the FCA like residential mortgages. These are when the property is either partly occupied by the borrower or let to an immediate family member.
- Mortgages regulated by the FCA under the Mortgage Credit Directive Order 2015. These are ‘consumer’ buy-to-let as defined by the Order.
- Mortgages not regulated by the FCA. These are mortgages which are predominantly for a business purpose.
The statement of practice will cover any residential buy-to-let lending not otherwise covered by FCA regulation.
Paul Smee, CML director general, said: “Lenders know how important it is to have a transparent mortgage market, in which borrowers can have confidence, and where lending policy is both responsible and clearly understood.
“The new buy-to-let statement of practice reflects what responsible lenders already do and offers a clear explanation of how buy-to-let lenders operate. We hope it will make a valuable contribution to understanding the buy-to-let lending environment.”
Bob Young, CEO of Fleet Mortgages, which has already adopted the statement of practice, added: “This is an extremely positive development for the buy-to-let sector and one that Fleet Mortgages is very supportive of, not least because it gives a level of transparency and clarity to all regarding how lenders should operate and the responsibilities of all stakeholders.
“We have been particularly vocal on the need for the entire lending community to maintain responsible lending practices, especially as the buy-to-let sector grows and new entrants come to market. By developing and maintaining this statement of practice it should help benchmark all buy-to-let lending activity in this marketplace, provide a level-playing field and hopefully raise standards right across the board.
“The CML should certainly be applauded for its work in this area as it sets a line in the sand for how existing – and new – buy-to-let lenders operate. If all stakeholders within a buy-to-let transaction are clear from the very start about what is expected of them, and they have all the information they need, then this should hopefully increase overall confidence in the market and develop a greater degree of best practice. Fleet Mortgages is committed to being clear and transparent about our lending practices and we believe this initiative will help all parties as we work and develop this fast-growing sector.”