As a result of the government’s implementation of the Mortgage Credit Directive (MCD), there have been changes to how we regulate buy-to-let activity.
The broking of buy-to-let mortgages is no longer a regulated credit activity. However, advising on, arranging, lending and administering consumer buy-to-let (CBTL) mortgages is subject to the legislative framework set out in the Mortgage Credit Directive Order 2015.
We are responsible for registering, supervising and taking action where necessary against firms carrying out these CBTL activities.
Defining 'consumer buy-to-let'
The MCD Order defines a CBTL mortgage contract as:
‘a buy-to-let 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.’
The legislation gives a series of circumstances that would constitute a buy-to-let customer acting for the purposes of business, and therefore taking them outside the legislation.
These include where the customer:
- uses the mortgage to buy a property, intending to rent it out
- has previously bought the property intending to let it out and neither they nor their relatives have lived there
- already owns another property that has been let out on a rental basis
The legislation also enables a firm to presume that a customer is acting for his/her business if the agreement includes the customer's declaration stating this fact, and that the customer understands that he/she is forgoing protections offered by the legislation to consumers, unless the firm has reasonable cause to suspect this is not the case.
Read the terms of this declaration in article 4(2) of the Order.
Standards of conduct
The government has used the legislation to set out the conduct standards that apply to the sale, underwriting and administration of a CBTL mortgage. These include:
- requirements for pre-contractual illustrations
- assessing creditworthiness
- arrears management
The conduct standards are based on MCD provisions, with some tailoring to reflect the nature of buy-to-let activity.
Apply to register as a CBTL mortgage firm
A firm that advises on, arranges, lends or administers CBTL mortgages must be registered to do so. We have different registration processes depending on the firm's current regulatory status:
- authorised firms - apply online via Connect (fee £100)
- unauthorised firm - apply via paper form (fee £500 or higher of application fee or £500 if made as a part of an application for authorisation)
Make changes to an existing CBTL registration
Existing CBTL registered firms can change the details of their registration via one of these forms:
If your firm is no longer doing CBTL business you must de-register your registration.
Firms registered for CBTL activity
You can check the Financial Services Register to see whether or not we have registered a firm to carry out CBTL activity.
Complaining to the Financial Ombudsman Service
The Financial Ombudsman Service can already consider complaints from eligible complainants about the broking of or lending under BTL mortgages, but only if the firm is authorised.
Borrowers can also refer complaints about registered CBTL firms' CBTL activity to the Financial Ombudsman Service.