Buy To Let Market could encounter problems due to EU directive

21 April 2012 Categories: News

Buy To Let Market could encounter problems due to EU directive

If the draft EU directive on Credit Agreements Relating to Residential Property (CARRP) gets the go ahead this year then it could spell huge problems for the UK buy to let market. According to the directive the way in which all buy to let mortgage applications are assessed should be the same as that of owner-occupier mortgages, as is the practice on the continent already.

This would mean that buy to let mortgage applications made in the UK would need to be assessed based on the borrower’s earnings and not the projected rental income for the property being purchased. While this method of assessment wouldn’t be a huge problem for portfolio landlords it would mean that small-time landlords and potential buy to let landlords could be refused the loan they need to get started in the business.

The Residential Landlords Association is opposing the directive, as are other associations within the UK. Unfortunately if the EU decides to standardise the way in which residential mortgage applications are assessed then the UK would have to abide by the new rules and tow the line. In short the growth of the buy to let sector in the UK could stop virtually overnight.