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Buy to let lenders in the UK who are members of the Council of Mortgage Lenders are adopting a new statement of practice, designed to provide clarity about how responsible lenders operate. The statement reflects existing good practice and aims to ensure that there is a clear explanation of the obligations of buy to let borrowers on their mortgages and is a sign that buy to let lending is growing. It signposts additional information from other organisations about the responsibilities of being a landlord, and is endorsed by the Residential Landlords Association, the Association of Residential Letting Agents (ARLA), the Association of Mortgage Intermediaries, the Intermediary Mortgage Lenders Association, and the British Bankers Association (BBA). Some 31 lenders representing an estimated 90% of the buy to let market have already adopted the statement of practice. All CML members who offer buy to let mortgages are expected to adopt it over the course of 2015. The statement sets out the overarching principles that individual lenders use in determining their own lending strategy and practice in relation to lending principles, information given to customers, customer responsibilities, lender responsibilities on affordability, handling financial difficulties, fraud prevention and complaint handling. Next year when the consumer buy to let lending framework is established under the Financial Conduct Authority, the UK’s financial watchdog, to comply with the Mortgage Credit Directive, buy to let lending will fall into one of three types. These are mortgages regulated by the FCA like residential mortgages when the property is either partly occupied by the borrower or let to an immediate family member; mortgages regulated by the FCA under the Mortgage Credit Directive Order 2015 defined as ‘consumer’; and mortgages not regulated by the FCA which are those predominantly for a business purpose. The statement of practice will cover any residential buy to let lending not otherwise covered by FCA regulation. ‘Lenders know how important it is to have a transparent mortgage market, in which borrowers can have confidence, and where lending policy is both responsible and clearly understood,’ said CML director general Paul Smee. ‘The new buy to let statement of practice reflects what responsible lenders already do and offers a clear explanation of how buy to let lenders operate. We hope it will make a valuable contribution to understanding the buy to let lending environment,’ he added. Continue reading →
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