New Eu Mortgage Rules Could Hit House Prices

[Caveat Mortgagor]

http://blogs.telegraph.co.uk/finance/ianmcowie/100013206/new-eu-mortgage-rules-could-hit-house-prices/

European Union (EU) plans to regulate Britain’s booming buy-to-let sector could restrict mortgage availability, force landlords to sell and cause house prices to fall.

Other unintended consequences of proposed EU legislation could include reduced numbers of properties to rent, according to new analysis by the Building Societies Association (BSA). Leading mortgage brokers and estate agents agree that the buy-to-let (BTL) sector needs EU intervention like a fish needs a bicycle – but fear that is what it is going to get, whether landlords and tenants want it or not.

Now, despite the Treasury deciding two years ago that no further intervention in the housing market is justified, new legislation looks set to take effect next year. The EU draft directive on Credit Agreements Relating to Residential Property (CARRP) says BTL should be regulated in the same way as residential mortgages for owner occupation.

That could prevent lenders and borrowers – including existing BTL landlords seeking to remortgage at the end of fixed deals – from taking anticipated rental income into account when assessing how much mortgage is affordable.

Instead, EU proposals would bring Britain into line with Continental practice and force lenders to assess BTL in the same way as mortgage applications by owner occupiers on their prime residence; that is, the main criterion would be the borrower’s earnings.

Paul Broadhead, head of mortgage policy at the BSA, said: “If rental income is excluded from consideration when underwriting BTL then the availability of new borrowing could cease fairly rapidly. In addition, those with existing BTL loans may well be unable to refinance.

“Over time this could lead to a reduction in private rented sector properties. At the extreme, current BTL borrowers may be forced to sell their property portfolios which would have obvious implications for existing tenants and the housing market as a whole.”

That’s no exaggeration, given the growing importance of private rented accommodation in Britain’s housing market. While the proportion of home ownership is falling, the number of properties offered for rent has increased by more than 1m since 2005.

BTL has delivered income and capital gains despite dismal returns from bank and building society deposits and shocking stock market setbacks. About three quarters of privately rented homes are owned by husbands and wives or individual landlords – as opposed to institutional investors – and BTL mortgages back more than a third of these properties.

Mr Broadhead said: “It would be totally inappropriate to bring this lending under the auspices of a proposed residential mortgage regulatory regime. Any attempt to do so could have a detrimental impact on the ability of lenders to provide BTL products, and the consequent ability of investors to provide properties for rent.”

David Hollingworth of London & Country Mortgages agreed: “The EU proposals could extend to BTL a similar regime as owner occupier mortgages and lead to tighter criteria which mean landlords face a very different process when they come to the end of their deal.”

Ed Mead of the Association of Residential Letting Agents (ARLA) and Douglas & Gordon estate agents, pointed out: “Potential EU legislation might drive many BTL landlords away from what is a vital and expanding part of UK housing provision.

“This must be viewed with caution. Our Government ought to be wary of taking a lead from the EU here and actually encourage informed investment into this sector with tax breaks, not lumping BTL in with those residential purchasers who need all the protection they can get.”

Housing minister Grant Shapps should send a memo to his opposite number at the EU: “If it ain’t broke, don’t fix it.”

Love the comments of the enraged boomers: my particular favourite is:- phil-kean

New EU Mortgage Rules

- means that British Servicemen and women died in vain fighting in two World Wars.

[Rozza]

"At the extreme, current BTL borrowers may be forced to sell their property portfolios which would have obvious implications for existing tenants"

Yeah obvious implications like not having to subsidise a bunch of theiving git BLT scam artists and being able to afford their own home.

I generally dislike the EU but on this i am in full agreement, people waffle on about "BTL is a business, therefore its appropriate... etc etc" except that this business is cancerous and should be discouraged

I also like this bit

"not lumping BTL in with those residential purchasers who need all the protection they can get"

This is true, BTL should get NO protection, if you want to take the risk and invest and cant afford the repayments then there should be reposession!

[inflating]

I dare say they'll find a way to let the UK BTL off the hook

If they don't my only concern is rents increasing even more (in the areas where rents are going markedly higher, it is no joke at the moment, thankfully not all areas)

[(Blizzard)]

...

I generally dislike the EU but on this i am in full agreement, people waffle on about "BTL is a business, therefore its appropriate... etc etc" except that this business is cancerous and should be discouraged

...

BTL isn't a business in any meaningful sense of the word. Businesses reduce costs for society, by providing new or better products and services and through competition. BTL is, in essence, the hoarding of land, which does nothing but increase costs to society.

Landlords can only pass on these costs because the government grants exclusive rights to land without any obligation to pay the people who provide those rights.

BTL is really something like the London congestion charge concession. It would not exist in a real market economy, and has more in common with benefits than it does with anything entrepreneurial.

Edited November 11, 2011 by (Blizzard)

[roadtoruin]

http://blogs.telegraph.co.uk/finance/ianmcowie/100013206/new-eu-mortgage-rules-could-hit-house-prices/

European Union (EU) plans to regulate Britain’s booming buy-to-let sector could restrict mortgage availability, force landlords to sell and cause house prices to fall.

Other unintended consequences of proposed EU legislation could include reduced numbers of properties to rent, according to new analysis by the Building Societies Association (BSA). Leading mortgage brokers and estate agents agree that the buy-to-let (BTL) sector needs EU intervention like a fish needs a bicycle – but fear that is what it is going to get, whether landlords and tenants want it or not.

Now, despite the Treasury deciding two years ago that no further intervention in the housing market is justified, new legislation looks set to take effect next year. The EU draft directive on Credit Agreements Relating to Residential Property (CARRP) says BTL should be regulated in the same way as residential mortgages for owner occupation.

That could prevent lenders and borrowers – including existing BTL landlords seeking to remortgage at the end of fixed deals – from taking anticipated rental income into account when assessing how much mortgage is affordable.

Instead, EU proposals would bring Britain into line with Continental practice and force lenders to assess BTL in the same way as mortgage applications by owner occupiers on their prime residence; that is, the main criterion would be the borrower’s earnings.

Paul Broadhead, head of mortgage policy at the BSA, said: “If rental income is excluded from consideration when underwriting BTL then the availability of new borrowing could cease fairly rapidly. In addition, those with existing BTL loans may well be unable to refinance.

“Over time this could lead to a reduction in private rented sector properties. At the extreme, current BTL borrowers may be forced to sell their property portfolios which would have obvious implications for existing tenants and the housing market as a whole.”

That’s no exaggeration, given the growing importance of private rented accommodation in Britain’s housing market. While the proportion of home ownership is falling, the number of properties offered for rent has increased by more than 1m since 2005.

BTL has delivered income and capital gains despite dismal returns from bank and building society deposits and shocking stock market setbacks. About three quarters of privately rented homes are owned by husbands and wives or individual landlords – as opposed to institutional investors – and BTL mortgages back more than a third of these properties.

Mr Broadhead said: “It would be totally inappropriate to bring this lending under the auspices of a proposed residential mortgage regulatory regime. Any attempt to do so could have a detrimental impact on the ability of lenders to provide BTL products, and the consequent ability of investors to provide properties for rent.”

David Hollingworth of London & Country Mortgages agreed: “The EU proposals could extend to BTL a similar regime as owner occupier mortgages and lead to tighter criteria which mean landlords face a very different process when they come to the end of their deal.”

Ed Mead of the Association of Residential Letting Agents (ARLA) and Douglas & Gordon estate agents, pointed out: “Potential EU legislation might drive many BTL landlords away from what is a vital and expanding part of UK housing provision.

“This must be viewed with caution. Our Government ought to be wary of taking a lead from the EU here and actually encourage informed investment into this sector with tax breaks, not lumping BTL in with those residential purchasers who need all the protection they can get.”

Housing minister Grant Shapps should send a memo to his opposite number at the EU: “If it ain’t broke, don’t fix it.”

Love the comments of the enraged boomers: my particular favourite is:- phil-kean

New EU Mortgage Rules

- means that British Servicemen and women died in vain fighting in two World Wars.

Notice the sentence "Leading mortgage brokers and estate agents agree that the buy-to-let (BTL) sector needs EU intervention like a fish needs a bicycle – but fear that is what it is going to get, whether landlords and tenants want it or not."

They 'report' in the first part that blatant rentseeking VIs don't want their gravy-train interfered with, but then imply by lumping LL and tenants together in the second part of the sentence that tenants interests are aligned with those of Landlords. Biased reporting of the worst kind. Had such anti-BTL legislation been in place - in concert with properly regulated multiples on residential mortgages - the wholly destructive property boom could have been largely mitigated.

If the Govt was suggesting this, I'm sure this forum would say it's a great idea; as it's the EU I'm guessing there will be muted agreement or opposition from the UKIPpers on here.

[jammo]

Just look at the state of this article. Look at the grim picture of Ian Cowie, the picture of black clouds gathering over an ordinary looking row of houses. Then read the article - all doom and gloom. A token mention of the hardship for tenants, but basically bemoaning the possible risk that investors' portfolios could become less rewarding.

Oh and Cowie's final words are patently rediculous:

Housing minister Grant Shapps should send a memo to his opposite number at the EU: “If it ain’t broke, don’t fix it.”

Well it is broke Ian, it is. The whole economy is based on this housing ponzi fueled in part by slack lending and in particular the bottom end of the market being snaffled up by all the unqualified, unregulated amateurs whose sense of self importance is only bolstered by their free reign up until now and the nonsensical tax breaks and loopholes that are rife in the sector.

Does Ian seriously expect any sympathy for the risk that some property investors might not be able milk quite as much out of the poor (or indeed the "young professional" who they speciafically targetted over the years), espcially now that the recession is approaching it's 4th year. Well he would be dissappointed if he did, because look at the comments.

Every single one commenting on how falling house prices will be a good thing. And it's not just that the article is linked to from this site rest assured. All articles of this type get the same response, and have done since before the start of the decade. It seems the only people who fear house price falls are newspaper reporters and the rich. Why is it that they can't see that their trite articles come across as crass and out of touch to literally every reader. Or is it that they like to write such inflammatory stuff in the same was Daily Mail "reporters" revel in making up stories about extreme benefits cheats and economic migrants.

[laurejon]

The EU ? Oh yes I remember them, they bankrupt their members due to fraud and corruption and broke up in 2012.

I dont think anything the EU has to say is going to be of any consequence in the near future.

[Redcellar]

Believe it when I see it happen. If it even gets forced through, 2020 implementation? Doubt anything this side of the decade.

[Guest tbatst2000]

What have the EU ever done for us eh?

[Sir Harold m]

Notice the sentence "Leading mortgage brokers and estate agents agree that the buy-to-let (BTL) sector needs EU intervention like a fish needs a bicycle – but fear that is what it is going to get, whether landlords and tenants want it or not."

They 'report' in the first part that blatant rentseeking VIs don't want their gravy-train interfered with, but then imply by lumping LL and tenants together in the second part of the sentence that tenants interests are aligned with those of Landlords. Biased reporting of the worst kind. Had such anti-BTL legislation been in place - in concert with properly regulated multiples on residential mortgages - the wholly destructive property boom could have been largely mitigated.

If the Govt was suggesting this, I'm sure this forum would say it's a great idea; as it's the EU I'm guessing there will be muted agreement or opposition from the UKIPpers on here.

I just thought I'd annoy a few of my fellow UKIPPERS by suggestng that we should support this not because it came from EU but because it was the right thing to do (like many things, You cant oppose something because it came from a source you dislike).

I donned my tin hat but Ive yet had ANY negative responses to my suggestion.

[ingermany]

European Union (EU) plans to regulate Britain’s booming buy-to-let sector could restrict mortgage availability, force landlords to sell and cause house prices to fall.

Other unintended consequences of proposed EU legislation could include reduced numbers of properties to rent, according to new analysis by the Building Societies Association (BSA). Leading mortgage brokers and estate agents agree that the buy-to-let (BTL) sector needs EU intervention like a fish needs a bicycle – but fear that is what it is going to get, whether landlords and tenants want it or not.

Now, despite the Treasury deciding two years ago that no further intervention in the housing market is justified, new legislation looks set to take effect next year. The EU draft directive on Credit Agreements Relating to Residential Property (CARRP) says BTL should be regulated in the same way as residential mortgages for owner occupation.

Housing minister Grant Shapps should send a memo to his opposite number at the EU: “If it ain’t broke, don’t fix it.”

Are these the same people who are calling on government to force the banks to lend more to home buyers and to force the banks to accept lower deposits?

No further government intervention in the housing market? I wish that were a realistic prospect. Instead they are pumping in hundreds of billions of pounds in order to inflate prices. Taxpayers money is being diverted directly to support mortgage owners and debtors in order to protect property asset prices. There is unprecedented market intervention to force prices up. It's funny how these idiots only notice intervention when there's a danger of it being against their own narrow interests. When it goes in their favour they're literally begging for more intervention and the "something has to be done" squealing is deafening. OK then, scrap the proposed EU intervention, but also remove SMI, remove inflated LHA (landlord subsidies), remove Firstbuy, Homebuy, and local authority subsidies to home sellers, remove emergency support to the BTL loan givers (Northern Rock, BandB, A and L, HBOS etc), Get taxpayer money out of the institutions that gave out 100-125% loans in order to push up house prices, stop creating inflation artificially by lowering interest rates. An end to government intervention in the housing market would indeed be very welcome, but I suspect not to the squealing vested interests of the BSA and Estate Agents.

[Redcellar]

Other unintended consequences of proposed EU legislation could include reduced numbers of properties to rent, according to new analysis by the Building Societies Association (BSA). Leading mortgage brokers and estate agents agree that the buy-to-let (BTL) sector needs EU intervention like a fish needs a bicycle – but fear that is what it is going to get, whether landlords and tenants want it or not.

Now, despite the Treasury deciding two years ago that no further intervention in the housing market is justified, new legislation looks set to take effect next year. The EU draft directive on Credit Agreements Relating to Residential Property (CARRP) says BTL should be regulated in the same way as residential mortgages for owner occupation.

All sounds fishy to me.

[ingermany]

All sounds fishy to me.

CARRP............It's an acronym begging for an anagram.

[porca misèria]

Sadly I fear this may have more to do with a torygraph Agenda than with reality.

Letting property is a perfectly valid business. The most these rules could ever do is force it to be treated as such. Thus, you'd take out a business loan to finance your BTL portfolio.

[Redcellar]

Instead, EU proposals would bring Britain into line with Continental practice and force lenders to assess BTL in the same way as mortgage applications by owner occupiers on their prime residence; that is, the main criterion would be the borrower’s earnings.

Simple question:

Isn't rental income part of borrowers earnings? So doesn't this make no difference unless you have a string of properties with large outstanding mortgages on them. Then affordability would come into play.

[Blod]

Why oh why have we got to wait for the EU to suggest these measures. The proposed steps should have been implemented by our government.

BTL is a business so shouldn't be allowed to use retail products. That sector should have products that take into account the risks associated with it, insurers separate this sector, others should too.

[sims]

Reality check. Finding mortgages for rental properties is actually easier in continental Europe than in the UK. Yes, they are assessed on the basis of affordability to the borrower in line with residential mortgages, but if the borrower already has proven rental income, that can of course be taken into account.

And because the mortgages are under the same regulatory framework as other mortgages, there is much less red tape than in the UK. So basically, if you can afford the mortgage and have a decent LTV, the lender won't care that much about residential vs. rental use. I have a few acquaintances who are landlords in Germany. They have an apartment house with about 6 flats. They live in one, rest is part rented to family below market rate, most rented out publically. And this is all financed with a single mortgage on the entire building by the local savings bank and no lender would bat an eyelid (as long as LTV is below 60), since such things are a fairly standard arrangement.

Try finding financing for something like that in the UK on decent terms, most lenders would simply laugh at you.

[mrpleasant]

Just look at the state of this article. Look at the grim picture of Ian Cowie, the picture of black clouds gathering over an ordinary looking row of houses. Then read the article - all doom and gloom. A token mention of the hardship for tenants, but basically bemoaning the possible risk that investors' portfolios could become less rewarding.

Oh and Cowie's final words are patently rediculous:

Housing minister Grant Shapps should send a memo to his opposite number at the EU: “If it ain’t broke, don’t fix it.”

Well it is broke Ian, it is. The whole economy is based on this housing ponzi fueled in part by slack lending and in particular the bottom end of the market being snaffled up by all the unqualified, unregulated amateurs whose sense of self importance is only bolstered by their free reign up until now and the nonsensical tax breaks and loopholes that are rife in the sector.

Does Ian seriously expect any sympathy for the risk that some property investors might not be able milk quite as much out of the poor (or indeed the "young professional" who they speciafically targetted over the years), espcially now that the recession is approaching it's 4th year. Well he would be dissappointed if he did, because look at the comments.

Every single one commenting on how falling house prices will be a good thing. And it's not just that the article is linked to from this site rest assured. All articles of this type get the same response, and have done since before the start of the decade. It seems the only people who fear house price falls are newspaper reporters and the rich. Why is it that they can't see that their trite articles come across as crass and out of touch to literally every reader. Or is it that they like to write such inflammatory stuff in the same was Daily Mail "reporters" revel in making up stories about extreme benefits cheats and economic migrants.

Very well put. Shame you can't get THAT printed as easily as your average bumbling, self-serving journo.

[SarahBell]

Simple question:

Isn't rental income part of borrowers earnings? So doesn't this make no difference unless you have a string of properties with large outstanding mortgages on them. Then affordability would come into play.

It might be income but against outgoings (the mortgage) it might not mean anything.

And if they're going to look at income will they ask to see what's been declared to HMRC? (TBH if they did that then it'd take a few more chancers out of the game)

[Badger]

Just posted this separately but the Excess is also squealing, happy days!

[rented]

Reality check. Finding mortgages for rental properties is actually easier in continental Europe than in the UK. Yes, they are assessed on the basis of affordability to the borrower in line with residential mortgages, but if the borrower already has proven rental income, that can of course be taken into account.

If it would take the single house BTL-er out of the game that'd be a start.

[The Knimbies who say No]

Cowie is a pillock. He occasionally shows signs that he understands the problem, but his output is heavily skewed towards the sensationalist and ridiculous. Perhaps it's a result of editorial policy, perhaps it's that he really is a bit dim. Either way, his output is best avoided.

[hpc-craig]

About time too. I'm pleased to see this rule being proposed and really hope it is implemented. I am disappointed that it had to come from Europe rather than our own government, but glad to see it all the same.

Also, they were just talking about this on BBC News. Declan whatshisname was a bit upset about this by the look of him (I imagine he is up to his eyeballs in BTL), so he called in his mate and absolute non VI Ray Boulger to give his non biased opinion. Ray mentioned 'negative impact on prices' and the new measures could 'precipitate falls'. He looked a bit upset aswell, which is surprising, as I would have thought that being a non biased expert he wouldn't have minded either way. It's not like the new rules would mean that Ray's firm would lose custom from would be BTL'ers and FTB's who hold out for lower prices.

Of course, maybe he is not a non biased expert and is actually a VI brought in my Declan to spin more lies to the public.

[Bloo Loo]

we dont need ANY borrow to let houses int he UK.

We could use BUY to let no problems.

we dont need the financialisation of this vital commodity.

we do need a ban on borrowing to purchase a residential dwelling.

[salamander]

Does anyone know about the practicalities and financial implications of setting up a limited (or other type of) company for holding BTL property ?

I have no interest in doing this myself but it occurs to me that if it's easy to do, anyone looking for a mortgage for BTL would just do this. I'm not an expert at all but the only downside I can see is that (I believe) there would be no way of avoiding capital gains tax when selling, as is currently accomplished by claiming a property to be a primary residence .

If this turns out to be a practical way to avoid this EU ruling it seems to me that the only result would be the setting up of large numbers of new companies and landlords would be under no pressure to sell, apart from those desperate to avoid paying CGT.

Anyone know?