A proposed new EU Directive has recently been proposed on mortgages, aiming to deal with the problem of irresponsible lending. If successful, the new regulations could make the property market more stable without drastic booms and busts that were experienced in Ireland and Spain. On the other hand, landlords and estate agents claim that new regulations could be very damaging for the UK private rented market. Under the new regulations, lenders will not be able to use future rental income when assessing a landlord’s eligibility for a mortgage for buy-to-let properties. The new directive is set to be discussed in the European Parliament in March 2012 and could become reality from 2013, if EU MPs vote in favour of it.

The new regulations can have a significant effect on the UK property market. Almost 90% of English landlords are private individuals and most buy-to-let (BLT) purchases are made on the basis that landlords will finance their mortgages from rental income. There is concern that if the new rules come into effect, most smaller landlords who only have a few buy-to-let properties will not be able to purchase them any more, which could seriously damage the private rented market.

Alan Ward, chairman of the Residential Landlords Association (RLA) has expressed his concern about the new directive: “The Directive is nothing short of a disaster for housing in the UK. It would effectively kill off buy-to-let mortgages and lead to a collapse in the market.”

Many other landlord and letting agent associations have similarly found the proposed new rules problematic, questioning its potential stabilising effect. They maintain that an amendment to the Directive is imperative, taking buy-to-lets out of its scope, especially as buy-to-let mortgages are far more prevalent in the UK than elsewhere in Europe. Many also argue that whilst private borrowers may need more protection when it comes to mortgages, encouraging growth and informed investment in the BTL sector is essential for the growth of the UK housing market.

Morgan Kelly Solicitors can offer a wide range of residential property conveyancing and commercial property services, and we can assist you with most property matters, including buying and selling a property, mortgages and remortgages, tenancy agreements, land transfers and registrations and equity release schemes. Contact us for more information.

Photo © Lydia