Were You Affected by the New European Mortgage Rules?
Patrick Littlemore Tue 31 May 2016
On the 21st March, the MCD (Mortgage Credit Directive) came into effect, yet with all the excitement surrounding the stamp duty deadline recently, this very important piece of regulation seems to have slipped in under the radar...
This is an EU-wide regulation designed to foster a single market for mortgages and to protect consumers. It is quite a complicated and wide-ranging piece of legislation, which is perhaps why the press has not picked up on it, but it does specifically affect the Buy-to-Let (BTL) market in the following ways:
Consumer Buy-to-Let (CBTL): This new classification of rental property means that if the property was not purchased explicitly for the purpose of renting (i.e. you previously lived in the property, inherited etc.), the new classification of CBTL will apply.
In these cases, lenders are taking one of three approaches:
- A minority are being given the same treatment as before
- The majority are required to pay a larger deposit or re-mortgage with a lower Loan-to-Value rate
- Or, in a small number of cases, loans are not offered at all
Whereas any property purchased specifically as a rental property is now called BTL for Business and is treated exactly as before.
Second Charge Mortgages: If you want to top up an existing loan from another provider, other than your main mortgage lender, this is called a Second Charge. These are now treated as normal mortgages, and the process is the same. Costs have come down substantially for these types of loans, and they can be a great way to release equity for further purchases or refurbishment works, while not disturbing the main loan. These can even be on very low interest rates.
Despite all this change in the BTL market, it's still relatively easy to borrow money however, the market can be confusing, so to navigate these changes, we'd suggest speaking to a mortgage broker who will provide impartial, expert advice. Marsh & Parsons currently works with a third-party broker, called Rose Capital Partners, who are offering free reviews for our landlords to see if they have been affected and to provide a general financial health-check.
If you're considering re-mortgaging or further purchases, or you'd like to take advantage of this offer, please feel free to contact Rose Capital Partners here.