Posts with tag: mortgage credit directive

71% of accidental landlords unaware of tax changes

Research from Direct Line for Business indicates that over half of new buy-to-let mortgage applicants are unaware of mortgage tax relief alterations. The firm highlights that accidental landlords are most likely to be unaware of the changes in legislation.


A survey of mortgage brokers revealed concerning results. 62% of respondents said they were unaware of changes to mortgage tax relief or the EU’s Mortgage Credit Directive. This is extremely worrying as these changes could impact on their mortgage availability criteria.

This number rose to 71% amongst so called accidental landlords-those who rent out a property having inherited due to unforeseen circumstances. Mortgage advisers suggest that accidental landlords account for 17% of the total new mortgage applications. Overall, buy-to-let mortgage applications have grown by 29%, according to the report.

In addition, just 7% of mortgage advisors said they felt the Mortgage Credit Directive will have a positive impact of buy-to-let mortgage approvals. 59% said they believed it would have a negative effect. Concern is growing that the Mortgage Credit Directive will see landlord mortgage lending seen as consumer lending, thus making accidental landlords subject to more stringent lending criteria.

From next April, changes to mortgage tax relief will see landlords unable to deduct mortgage interest payments before working out their bill. Instead, they will receive a tax credit, equivalent to 20% basic-rate tax on this amount.

71% of accidental landlords unaware of tax changes

71% of accidental landlords unaware of tax changes

Significant alterations

Nick Breton, Head of Direct Line for Business, said, ‘the new EU legislation on mortgages coupled with the Government’s increase in buy-to-let taxation could significantly alter the buy-to-let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord.’[1]

‘With house prices in the UK rising by 7% in the year leading to October 2015 and with the estimated average deposit standing at more than £61,000, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property or those seeking a temporary stay in a town or city,’ Breton added.[1]



Treasury Defines Accidental Landlord

Published On: February 4, 2015 at 11:54 am


Categories: Landlord News

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The Treasury has established a definition for accidental landlord, as it looks toward applying the EU’s Mortgage Credit Directive.

Treasury Defines Accidental Landlord

Treasury Defines Accidental Landlord

The Treasury, who published draft legislation last week, have defined consumer buy-to-let contracts, known as accidental landlords, as any contract the borrower has not entered “wholly or predominantly” for business purposes.1

It launched its initial conference on the Directive in September, when it claimed accidental landlords would be put under regulatory scrutiny, however, a definition was not confirmed.

If a property has been inherited or bought as a residential lodging before a change in circumstances that led to it being rented, these transactions will be caught under the new system, and treated as a regulated mortgage contract under Mortgage Conduct of Business (MCOB) rules.

If the borrower on a buy-to-let contract has clearly stated that the property will be used for rental purposes, they will remain unregulated, unless the lender believes the borrower to be lying.

The new rules will not apply to loan applications submitted before 21st March 2016.

Furthermore, the Treasury has confirmed that responsibility for guaranteeing regulatory compliance regarding buy-to-let contracts lies with the broker firm, not the individual adviser.

Association of Mortgage Intermediaries (AMI) Chief Executive, Robert Sinclair, says: “The clarification on what comprises regulated consumer buy-to-let is positive.”1

Paul Broadhead, Head of Mortgage Policy at the Building Societies Association (BSA), adds: “The BSA is still of the view that the Directive will offer little or no benefit to UK consumers but will add cost, complexity, and confusion to the mortgage process.

“However, we welcome the Government’s approach to implementation, putting in place the minimum requirements to meet European law.

“The introduction of an appropriate framework for consumer buy-to-let will keep the majority of buy-to-let lending outside the scope of regulation, minimising the disruption to the market.”1