If we’ve discovered anything about European legislation is that it moves fast to take power away from our Government and trade bodies often leaving us with undesirable outcomes. As part of their initiative to homogenise European Mortgage Legislation the latest proposals seem to be taking us towards regulated Buy To Let. This should have you all reaching for your pen to write to your MP, and I’ll tell you why.
Commercial projects and finance are fuelled by totally different objectives than a conventional house purchase of a property to live in. It will be difficult or even impossible to assess the suitability of a commercial or buy to let mortgage in the same way as the rest of the mortgage market. Take a simple case – purchase of a currently unprofitable unit to refurbish it as 4 flats which will then be rented for a significant yield. Many lenders and landlords would be extremely comfortable with this – how it would be assessed within anything that resembles the proposed European framework is another question entirely.
As we move towards a market dominated by private rental, with buy to let is set to become as much as one third of the mortgage market in the UK it’s crucial that we have our say about the shape that market takes.
Let’s Look At What’s Different In The European Finance Market
In my view only Holland has a market where the majority of consumers take genuine independent advice before selecting a mortgage or insurance product. Much of the rest of Europe has a totally different structure with Bancassurance providers dominating all aspects of the market. No other country has such a thriving market for home ownership and buy to let investment. As public funding dries up for housing and building stagnates in the face of falling first time buyer demand we must ensure that what works in less sophisticated markets isn’t forced upon us to all our detriment.
Local legislation must allow for opt outs from certain elements of the new proposals in Member States where that has clear benefits to the market and our economic recovery. Certainly all Europeans are entitled to the same basic rights and protection and the implementation of a uniform residential mortgage market across the continent is an admirable objective. However, that must not come at the detriment of well established and entirely different markets which may exist exclusively in some Member States. For example, of course, the buy to let market in the UK. Only a fool would argue that the same legislation should apply to a landlord purchasing a 7 flat multi unit freehold block as would apply to a first time buyer purchasing their first home. We aren’t a nation of fools and I would strongly urge all of you to write to your MEP and MP to ensure we aren’t treated like one.
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