Buy to let mortgages look set to escape tough new laws restricting borrowing for landlords after European MPs cleared the way to write them out of the draft bill.
The European directive on credit agreements relating to residential property (CARRP) will still tighten up lending rules for residential mortgages.
The controversial proposal for buy to let mortgages would have forced lenders to underwrite affordability for landlord loans in the same way as any other home loan.
Effectively, instead of considering rental income, banks and building societies would have to make lending decisions based on the landlord’s income.
The UK government and the Council of Mortgage Lenders, the UK trade body for home loan firms, led lobbying against the plan on the grounds buy to let mortgages are commercial not personal borrowings.
Other European countries were largely unaffected by the proposal as many have small-scale property investment markets, or where property is owned by landlords, the loans are taken out by companies rather than individuals.
The draft voted through the EU Parliament includes a clause that will allow the UK government exempt buy to let from the directive.
The deal is not signed and sealed – the bill now goes to each country to thrash out the final details before becoming European law, probably in a year and with another year after that for final implementation.
“We’re pleased to see that many of the long standing issues we have been lobbying on have reached a positive outcome for the UK in the European Parliament,” said a CML spokesman.
“For example, the UK would be able to exempt buy to let from the directive. However, some provisions have been included which only emerged at a late stage of negotiations but which may not have had their full implications considered and we will continue to work on these issues as the directive goes into its next stage of discussions.”
