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Monday, November 10, 2014

Accidental landlords to face stress tests

A new piece of EU legislation, the European Mortgage Credit Directive is continuing to cause confusion in the UK mortgage industry.

The industry are still unsure quite how the new legislation will impact on the UK's community of 'accidental landlords'. 

This week the Council of Mortgage Lenders went to the Treasury and the financial regulator, the Financial Conduct Authority (FCA), to ask for them to speak with the EU to help clear up the uncertainty. 

The fear is, this new piece of European legislation will prevent "accidental landlords" from securing a mortgage on their second property. If a lender perceives them not to be a 'professional' landlord, they will instead, by default, be classed as a 'consumer' and therefore may will not be eligible for a Buy to let mortgage product.

The line defining who is n'accidental landlord' and who isn't is also blurred, but put simply an 'accidental landlord' is someone who has become a landlord through circumstance, usually because they have not being able to sell their residential property, and not because they purchased the property with the intention of renting it out from the offset. 

Those properties that have not been occupied at any time by the borrower or a family member should definitely not be effected by the changes.

Those landlords that are classified as 'accidental' could find the new EU regulations proposed to come in this April impacting significantly on the type of lending available to them. Any loan on a second property, unlike BTL loans, could be liable to all the same financial stress tests and restrictions that are face on residential mortgages, even though the property is to be rented out to tenants.

This could be result in the death of the 'accidental landlord'.

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