If you think this might be you in the next year or so, you’re going to be subject to new affordability tests.
By March 2016 a new European Union directive will have been introduced, which is likely to hit people who need a B2L mortgage, but who aren’t seen as professional property investors.
At the moment people in the UK who need to let their home can move over to a landlord loan. B2L is currently classified as a business transaction and so fall outside the regulated residential mortgage system. But this EU regulation is likely to put the brakes on that. Would-be landlords in this situation may be considered ‘risky’ because they’ll be seen as consumers, not businesses.
We’re not sure of the extent of the impact this ruling will have, but it’s on everyone’s radar – including that of the Council of Mortgage Lenders (CML).
The organisation recently released a response saying that a hard March 2016 deadline will cause problems for mortgage cases that are open but not yet complete. It’s also concerned that changing B2L for accidental landlords to a consumer transaction will change a long-established market approach. Plus, the term “accidental landlord” is very broad – the definition needs to be nailed down.
To give you an idea of the number of people that could be hit by this change, from the current 1.6 million B2L mortgages, about one fifth are thought to be owned by so-called accidental landlords. It’s understandable why the industry is watching.
We’ll do our best to stay on top of it, so keep an eye out for updates.