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From the 21st March 2016 BTL mortgages will be treated differently. The government has chosen to use an exemption in the MCD that means they do not have to apply the Directive’s requirements to buy-to-let mortgage activity. However in order to rely on this exemption, an appropriate framework for this type of activity has to be put in place.
Once the MCD is in place BTL broking will be removed from the scope of credit broking under the consumer credit regime. With effect from 21 March 2016, business buy-to-let intermediation will not be a regulated activity.
Non-business BTL’s will be classed as Consumer BTL (CBTL) and CBTL intermediation will be subject to the government’s CBTL framework. You will need to register with the FCA to undertake this activity and you will no longer need consumer credit permission for it (i.e. credit broking). You may still require a consumer credit licence for other activities such as debt counselling.
Consumer buy to let
What is a CBTL? : a ‘consumer BTL’ mortgage contract is a BTL mortgage contract which is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.
You will not have to apply any MCD requirements to a customer who is deemed to be, or has identified themselves as, acting by way of business in taking out a buy-to-let mortgage. The legislation sets out a series of circumstances which would constitute a buy-to-let customer acting by way of business.
These include where a customer:
- Intends to use the mortgage to purchase property with the intention of letting out.
- Has previously purchased the property with the intention of letting it out and neither the customer nor a relative have inhabited it.
- Already owns another BTL property.
The regime is only relevant to credit secured on residential property. If a loan to a buy-to-let borrower is secured on commercial property, the loan is not a residential mortgage contract and the MCD rules do not apply.
Under the legislation, firms wishing to lend, administer, intermediate, arrange or provide advisory services in relation to CBTL from 21 March 2016 will need to be registered by the FCA to do so. If you don’t register you will be unable to carry out any CBTL business.
The registration will be a simple form to be completed via the FCA Connect system, via a variation of permission. They did say they would start accepting applications late summer, so far no update regarding if this is available yet. As normal the FCA will charge a fee for registering, this will be £100.
We will be updating H3 members and putting appropriate procedures in place for dealing with BTL's.