Buy to let lenders have signed up to a new code highlighting how new borrowing by first time landlords will work.
Under the European Union Mortgage Credit Directive, from April 2016, new categories of consumer and professional buy to let borrowers are introduced.
Consumer landlords are those who own one rental property and are likely to have become landlords by letting a former home when moving on.
Professional landlords are likely to own and manage a portfolio of properties that they have never lived in.
The directive means lenders have to apply different lending criteria to consumer and professional landlords, especially when assessing affordability of loans.
The code is an industry-wide statement dealing with how lenders will deal with consumer landlords when considering mortgage applications and if they fall into arrears.
Professional buy to let mortgages are unaffected by the code as they are outside the directive and Financial Conduct Authority regulation.
The CML confirms 31 lenders covering 90% of the buy to let mortgage market are supporting the code and more lenders are expected to join within a few months.
CML director general Paul Smee said:
“Lenders know how important it is to have a transparent mortgage market, in which borrowers can have confidence, and where lending policy is both responsible and clearly understood.
“The new buy to let statement of practice reflects what responsible lenders already do and offers a clear explanation of how buy-to-let lenders operate. We hope it will make a valuable contribution to understanding the buy-to-let lending environment.
“The code will cover any residential buy to let lending not otherwise covered by Financial Conduct Authority regulation.”
Buy to let lenders and landlord associations have already endorsed the code.
“If all stakeholders within a buy to let transaction are clear t about what is expected of them, then this should increase confidence in the market and develop a greater degree of best practice,” said Bob Young, of CEO of Fleet Mortgages, one of the lenders supporting the code.
