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Buy-to-let set to escape EC’s mortgage credit directive

The buy-to-let sector has been given a reprieve after a committee scrutinising the European Commission’s mortgage credit directive voted to allow the UK to exclude these types of loans from the new rules.

Buy-to-let experts have warned that the sector would be stifled it were captured by the proposals, which say lenders must take into account affordability when they advance a home loan. They argue buy-to-let loans are fundamentally different as landlords use rental income to meet the monthly repayments in most cases.

Today’s vote gives a clear indication of how the Econ committee feels the new rules should look.

The amendments voted on today – which were agreed after taking into account the original proposals from the EC and the amendments proposed by the Internal Markets and Consumer Protection committee – also state the UK could keep its key facts illustration for five years after the directive has been implemented.

The original proposals state all European Union member states would have to give clients a European standardised information sheet detailing mortgage offers. However, the Esis contains less information than the KFI.

A Council of Mortgage Lenders spokeswoman says: “We are pleased to see that many of the long standing issues we have been lobbying on have reached a positive outcome for the UK in the EU parliament today.

“So for example, the UK would be able to exempt BTL from the directive and we would be able to keep the KFI for five years after the directive has been implemented.”

However, the process is not yet over. These amendments, along with that of the Imco and the EC’s original paper, must now be voted through the European parliament. The European Council will then decide its position and then the three bodies, the council, parliament and commission will then enter negotiations over the final text.

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