If BTL ain’t broke, why regulate it?

8 October 2014 | By Peter Williams, Executive Director, IMLA

The Government’s U-turn on regulating the buy-to-let market as a result of the latest EU mortgage credit directive has disappointed many in the industry, who thought that the sector would be free from further interference. It comes as no surprise to learn that buy-to-let regulation is back on the agenda, with it being symptomatic of pressures in the wider housing market. The widespread feeling among industry insiders that these measures are neither desirable nor of benefit to the market are certainly not without good cause.

One of the key problems about the directive is the regulatory headaches that will no doubt ensue for lenders. As suggested during IMLA’s recent Great Mortgage Debate, there are many working in the market who believe regulation is already having an impact on volumes.

One prominent worry is that policing these new buy-to-let regulations (and partly due to the complexity of pinpointing these cases) will come with costs, which will be passed from lenders to landlords, and ultimately to tenants.

While our recent debate showed that a slight majority of attendees felt that the Mortgage Market Review has put the market on a more sustainable footing, further Government legislation could lead many to the conclusion that regulation has gone too far.

The key question to ask of the Government is whether the market needs this further policing and it is certainly questionable as to whether ‘accidental landlords’ form a significant enough chunk of the market to warrant the sector’s regulation.

Furthermore, most lenders already treat their buy-to-let lending in the same way they do their regulated lending, so it seems unfair to burden them further when there are seemingly few problems with the current status quo.