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Loan industry split on buy-to-let regulation

The mortgage industry is split on whether the booming buy-to-let market should be regulated by the FSA.

The Treasury says investing in buy to let is a commercial transaction and should not be regulated alongside the residential mortgage market from 2004.

The Council of Mortgage Lenders agrees with the Treasury but firms such as BM Solutions and Southern Pacific Mortgages believe this puts borrowers in danger.

Southern Pacific director of credit Stuart Aitken says the recent rapid growth in the market, especially in London, is mainly the result of people opting for buy to let as part of their financial planning or to supplement a pension.

He says they are not experienced investors buying property portfolios and should not be treated as commercial borrowers.

BM Solutions head of lending Michael Bolton says: “Buy to let should be dealt with in exactly the same way as residential mortgage regulation. The recent boom has seen people buying one or two properties – it is no longer the preserve of profess-ional landlords.”

But Bristol & West rejects regulation, saying buy-to-let mortgages should be seen as commercial loans and regarded as business transactions.

Britannic Money agrees, saying it deals with the traditional market and that 40 per cent of its buy-to-let borrowers are investing in property portfolios. Although the company concedes that some regulation should be introduced eventually, it does not see this as a priority for the FSA.

CML spokesman Bernard Clarke says: “It is not the same as someone purchasing a roof over their head. Investment in the sector should not be treated like a residential mortgage.”

•Mortgage Brief, p53

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