In its response to FSA proposals to regulate buy-to-let lending, the Council of Mortgage Lenders (CML) disagrees that buy-to-let lending should be regulated. The mortgage lending trade body said regulation would not offer greater consumer protection and its scope would affect other commercial activities. It also wouldn’t do the most important thing which is offer advice to investors on whether property is a sound investment at all, said the CML.
The CML's response states: "Fundamentally, the CML still believes that buy-to-let loans are essentially commercial transactions with an investment dimension, and should not be subject to retail mortgage regulation. Inappropriate regulation could further damage buy-to-let lending, which has shrunk substantially in the last two years, at a time when the government is separately promoting investment opportunities in the private rental sector. Extending the FSA's scope as proposed would undermine the government's wider housing policy."
However, the CML does agree with the proposals to extend regulation to cover second-charge mortgages, and ensure that borrowers are sufficiently protected when mortgage books are sold on, it said.
On second-charge lending, the CML's longstanding position has been that all secured lending should be regulated in the same way under the FSA. It said this would create a coherent and comprehensive framework, more aligned with EU regulation, although there is a need to ensure that the impact on low-cost home-ownership is properly considered before proceeding.
The CML also agreed that consumers could potentially suffer when mortgage books are "sold on" and said it believes these need to be regulated. However, regulation should only cover buyers when they make day-to-day decisions on the interest rate, other charges, service levels, and arrears management, not when decisions have been delegated to a servicer, it said.
CML director general Michael Coogan said: "While we support some of the proposals to extend regulatory scope, the Treasury and the FSA need to tread carefully to avoid unintended negative consequences. As far as buy-to-let is concerned, the regulatory proposals are barking up the wrong tree - for amateur property investors, poor investment advice is the issue, not the mortgage.”
The Council of Mortgage Lenders full response can be read on its website:http://www.cml.org.uk/cml/filegrab/ResponsetoHMTcpremortgageregulation-15Feb2010.pdf?ref=7093
Comments
some very good points made, instead of blind panic over banking crisis and jumping into regulate everything time should be spend considering the areas that need attention and those that could be harmed through over regulation withfocus on treating customers fairly