Buy-to-let lending should not be regulated, IMLA says

IMLA, the trade body representing lenders who market their products through brokers, has hit out at a planned European Directive to regulate buy-to-let mortgages in the UK.

IMLA said the Directive is an inappropriate vehicle to regulate commercial lending markets and in particular the provision of finance to the private rented sector in the UK.

In a statement, it said: “The UK market is relatively small but needs to expand quite rapidly to meet an expansion in demand being driven by a wide range of social economic and demographic factors.

“Unlike other EU markets, there is little institutional investment in the UK private rented sector with the bulk of property owned by private investors.

“The financial dynamics of buying and holding rented residential property in the UK are such that the market will continue to rely upon the motivation of private individuals for the supply of rented housing and they in turn will rely upon the supply of buy-to-let finance to facilitate the required growth.

“The inappropriate regulation of buy-to-let therefore as a consumer rather than commercial activity risks imposing constraints on the market that are not warranted and will have serious impacts upon the supply of property to the sector.”

IMLA also called for the European Directive not to impose other restrictive regulations. It said they could damage national markets, developing at different rates and at different ways.

In particular, it criticised the Directive for seeking to impose the European Standardised Information Sheet (ESIS), instead of the Key Facts Indicator (KFI) document currently used by UK lenders. 

It said that ESIS was of ‘dubious value’ to consumers and would cost lenders many millions of pounds if they had to change their systems in order to introduce it.  

IMLA also criticised European moves to shut credit-impaired consumers out of the lending market.

It said that those deemed to have negative equity “disregards the fact that many individuals can suffer some level of adverse credit but still represent an acceptable credit risk going forward.

“It is vital therefore that lenders and intermediaries are allowed to bring forward solutions for consumers that may have experienced financial difficulty in order to avoid excluding a significant proportion of consumers from access to home finance.”

The criticism of the Directive has been agreed by all the leading trade associations for the secured lending industry in the UK, including the British Bankers Association, the Building Societies Association, the Council of Mortgage Lenders, the Finance and Leasing Association as well as the Confederation of British Industry.

Their key concerns are supported by the Government.