Buy to let has been spared a potential catastrophe after the Council of Mortgage Lenders agreed a deal with the Government preventing the extension of the Consumer Credit Act.
It has secured an amendment to the act to ensure BTL loans for borrowers with a small number of properties, that could have been construed as non-commercial transactions, do not fall in the CCA’s scope.
Figures such as Accord Mortgages managing director Linda Will, John Charcol senior technical director Ray Boulger and Paragon Mortgages managing director John Heron had voiced fears that regulation without the amendment could force the end of fixed-rate and interest-only BTL mortgages.
The CML says: “The amendment will exempt agreements to provide credit of more than 25,000 to finance or refinance the purchase of land to be let for use as a dwelling or to finance or refinance the repair or improvement of such land.
“This amendment should ensure lenders are not faced with CCA regulation of BTL loans. It is not clear if it will exempt further advances and remortgages that involve capital raising for purposes other than improving or repairing the property.”
Heron has also waded into the debate on sub-prime BTL. He warns: “Stretching the criteria must be treated with caution. Does a BTL investment make any sense for an individual with a long track record of default and financial mismanagement?”