CML warns against buy-to-let regulation

15 February 2010 4:03 pm | By Paul Thomas

The CML warns that regulating the buy-to-let sector will not result in increased consumer protection and would capture an inappropriate range of commercial transactions.

In a response to Treasury consultation the CML says regulation could further damage buy-to-let lending.

The CML’s response says: “Fundamentally, the CML still believes that buy-to-let loans are essentially commercial transactions with an investment dimension, and should not be subject to retail mortgage regulation. Inappropriate regulation could further damage buy-to-let lending, which has shrunk substantially in the last two years, at a time when the Government is separately promoting investment opportunities in the private rental sector. Extending the FSA’s scope as proposed would undermine the Government’s wider housing policy.”

CML director general Michael Coogan says increasing the scope of regulation to cover buy-to-let mortgages would fail to address the issue of poor investment advice, which, it says, is the main cause of consumer detriment, not the mortgage itself.

He says: “While we support some of the proposals to extend regulatory scope, the Treasury and the FSA need to tread carefully to avoid unintended negative consequences. As far as buy-to-let is concerned, the regulatory proposals are barking up the wrong tree - for amateur property investors, poor investment advice is the issue, not the mortgage.
 
“The Treasury recognises that regulation has in the past dampened incentives to invest in the private rental sector. The proposals to extend mortgage regulation designed to protect home-owners to the buy-to-let sector would simply repeat this mistake.”

Meanwhile, in a similar response to the Treasury’s consultation, Building Societies Association head of mortgages Paul Broadhead says: “Subjecting buy-to-let investors to affordability and suitability assessments in the same way as owner occupiers is not appropriate, and would result in a further constraint in the supply of quality housing to the private rental sector.”

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