Details emerged of the implications to the marketplace, set to be introduced in April 2008, mean that most BTL transactions involving a landlord with less than three properties would be covered by the legislation.
Therefore, lenders working in the market will be forced to either review their systems to incorporate the CCA, concentrate solely on portfolio landlords or withdraw from the market altogether.
Mike Davies, director of compliance at Infinity Mortgages, commented: “With the regime that is proposed, the Department for Trade and Industry have created the worst of all worlds. This leaves a grey area that is simply a corridor of uncertainty for intermediaries and lenders. Yet again lenders will have to pick up further costs of regulation that are continually rising. If there is a way back from the precipice, the industry should be pushing for a satisfactory resolution now as the countdown to April 2008 is ticking.”
Changes to the CCA also dictate that no up-front fees can be charged on the mortgage, meaning valuation and arrangement fees would have to be added onto the deal.
Also, all regulated loans would have to be repayment mortgages, excluding taking on an interest only product and using the sale of the property as a repayment vehicle.
Philip Ryley, senior solicitor at Michelmores, believed specialist BTL lenders would have a lot of work to do to ensure they were compliant.
“Most non-Financial Services Authority regulated lenders will be caught by the new requirements and they will have to make sure their systems and controls and their staff are ready to deal with the differences between regulated and non-regulated loans. However, I think that some BTL lenders will continue to stay outside of CCA by confining their BTL mortgage lending to companies only or to high net worth clients.”
