Paragon Group director of mortgages John Heron says he is hopeful buy-to-let mortgages will not be included in the European Commission’s mortgage credit directive following a lobbying trip to Brussels.
Both the Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association have expressed concerns that the directive, which looks to harmonise mortgage regulation across EU member states, wrongly incorporates buy-to-let transactions its proposals.
Like the FSA’s mortgage market review, the directive says lenders should take into account factors like a consumer’s income and expenditure, credit score, other credit commitments and changes in base rate when calculating affordability. However buy-to-let loans are not included in the scope of the MMR.
The CML and Imla say regulating buy-to-let mortgages as a consumer activity rather than a commercial activity will constrain the sector because these types of mortgages are based on rental returns rather than income and affordability.
Heron says he was lobbying on behalf of the two trade bodies in Brussels last week. He claims he had positive conversations with both economic and monetary affairs chairwoman Sharon Bowles and internal market and consumer protection committee chairman Malcolm Harbour, who are both looking at the directive.
He says: “We have had conversations with the two committees looking at the directive. I think it is safe to say there is a great deal of sympathy about the argument that buy to let is a commercial product and does not belong under the regulation of residential mortgages.”