Accidental landlords are in danger of being caught out by Mortgage Credit Directive regulation coming in from March 21, Direct Line has warned.
Accidental landlords are in danger of being caught out by Mortgage Credit Directive regulation coming in from March 21, Direct Line has warned.
The landlord insurer found that 71% of landlords who didn’t intentionally set out to rent a property are unaware of the MCD – which will introduce regulation of ‘consumer buy-to-let’ with more stringent lending criteria for accidental landlords.
Direct Line warned that accidental landlords with one or two rental properties may fail to pass new affordability tests.
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.
“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.”
Advisers are not happy about the introduction of the MCD, as just 7% expected it to have a positive impact on buy-to-let approvals compared to 59% that expected a negative impact.
Mortgage advisers estimated that accidental landlords account for around one in six (17 %) new mortgage applications.
