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Trade body unveils buy-to-let code of conduct

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10/09/2014
The Council of Mortgage Lenders (CML) has revealed a statement of practice for buy-to-let lending in response to an EU Directive.

The Treasury has U-turned on its decision to allow the entire buy-to-let sector to stay beyond the reach of the Financial Conduct Authority (FCA) by stating that borrowers who have accidentally become landlords need protection.

Despite expectations that this move will only affect a small amount of borrowers, last Friday, both the CML and Building Societies Association voiced their frustrations that the sector would be subject to two sets of rules.

In a bid to prove to the Treasury that the rest of the buy-to-let sector, those who have made an active decision to become a landlord, do not need consumer-style protective measures it has come up with a set of voluntary principles for mortgage lenders.

Its sections are likely to cover;

– A treating customers fairly and responsible lending charter
– A committment to provide information that is fair, clear and not misleading, in the form of the existing Key Facts Illustration, for example
– A robust assessment of mortgage affordability which considers future rate rises, rental voids and arrears, and other costs. A commitment to take extra care if the borrower has an impaired credit history and to consider whether it is appropriate to lend in those circumstances
– The responsibilities of buy-to-let landlords, underlining their obligations to be competent and capable, and to accept that their borrowing is a commercial decision.
– Specific responsibilities of landlords to comply with legal requirements for letting property, treat their tenants fairly, maintain and insure the property adequately, and accept the commitments associated with taking out a mortgage.

The publication of a second consultation by the FCA, on proposals for implementing the European directive, is expected to be delivered shortly.

It is expected to detail the changes which will most affect the wider mortgage market.

The CML said: “We hope that its impact on buy-to-let will be limited, mainly affecting proposals for the register of firms that will operate in the sector.”

The rules within the Directive must be implemented by March 2016.

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