Buy-to-let mortgage regulation costs could be passed onto landlords

20 October 2009 / by Rachael Stiles

Landlords could pay the price of the Financial Services Authority's decision to start regulating the buy-to-let mortgage market, the National Landlord's Association has warned.

The NLA is concerned that the bill for regulating the buy-to-let mortgage sector could be picked up by landlords in the form of higher borrowing costs.

Yesterday the FSA published a range of measures that will see the mortgage market become a much tighter ship, including the scrappage of self-certified mortgages and stricter lending criteria whereby the borrower much prove their income and that they can afford to repay the mortgage.

These measures will, the FSA said, cure the problems which caused the current housing crisis – borrowers biting off more mortgage debt than they can chew – to "ensure that the mortgage market works better for consumers and that it is sustainable for firms."

While it agrees that added protection for smaller, less experienced landlords might be a welcome measure, the NLA does not believe that experienced professional landlords who run their property portfolio as a business will require, or welcome, the same level of protection.

Commenting on the FSA's proposals, David Salusbury, chairman of the NLA, said: "As with all proposals, the devil will be in the detail but the FSA may come across problems of definition. When does a so-called ‘amateur landlord' become a professional landlord? How large does a property portfolio need to become?"

Mr Salusbury suggests that the FSA is using the measures to reassure its audience that it is acting to prevent a similar mortgage crisis occurring again in the future, when it should be focussing on getting lenders to lend again.

"The lack of mortgage finance is hampering the housing recovery and, therefore, reducing the available housing stock on offer to those who choose to rent," he said.

About the potential increase in the cost of buy-to-let mortgage lending as a result of the regulation, Mr Salusbury commented: "The majority of landlords are financially sound and approach their lettings business in a professional and business-like way. We must ensure this fact is at the heart of all discussions relating to regulation which will affect landlords."

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