PS15/11: Buy-to-let mortgages – implementing the Mortgage Credit Directive Order 2015, feedback on CP15/3 and final rules

In this Policy Statement we summarise the feedback we received to the proposals contained in CP15/3 and give our responses. We are also publishing our final Handbook rules and guidance on implementing the Government’s legislative regime for consumer buy-to-let (CBTL) mortgages.

Why are we issuing this Policy Statement?

In our consultation published in February 2015 – CP15/3 – we outlined our proposed approach to implementing the Government’s legislative framework for consumer buy-to-let (CBTL) mortgages set out in the Mortgage Credit Directive Order 2015. In this Policy Statement, we summarise the feedback we received and our response, indicating where we have adjusted our approach to take respondents’ views into account. We are also publishing final Handbook rules and guidance, effective from 21 March 2016.

Policy Statement PS15/11 [PDF]

Who is this Policy Statement aimed at?

This Policy Statement will interest affected lenders, administrators and intermediaries and consumers in the buy-to-let mortgage market. This Policy Statement will also interest consumers who may wish to take out a buy-to-let mortgage after the government’s CBTL framework comes into effect. However, not every individual applying for a buy-to-let mortgage will be defined as a consumer under the legislation.

What is the background to this?

In our consultation we explained that the Government had decided to take advantage of an option in the Mortgage Credit Directive (MCD) that allows Member States not to apply the Directive to buy-to-let activity if they have an appropriate framework for regulating it. The Government set out such a framework in Part 3 of the Mortgage Credit Directive Order 2015 which establishes conduct standards, based on the MCD, that will apply to a firm conducting broking, advisory or lending activity with a buy-to-let consumer. These standards come into effect from 21 March 2016 and do not apply to a buy-to-let customer acting wholly or predominantly for the purposes of business.

In general, respondents recognised that the scope of this consultation was in line with the powers conferred on us by legislation.

There was broad support for our proposed approach across each of the four main areas on which we consulted.

What are the next steps?

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. We aim to start accepting applications later this summer. To give firms enough time to plan their applications, we are publishing the specimen application form for unauthorised firms alongside this Policy Statement. Further information on the registration process for firms that are authorised, or hold an interim permission for consumer credit, is set out in response to question 1 in the main paper. We would encourage firms to apply as soon as possible after registration opens.

To understand the registration fees that CBTL firms will be required to pay, firms are encouraged to read our Policy Statement setting out our response to the recent fees consultation, which will be published in June 2015. Firms are also encouraged to respond to our March 2016 fees consultation, which will propose the periodic fees and Financial Ombudsman Service general levy payable by CBTL firms for 2016/17.

In addition to our further work on fees, we intend to issue technical documentation later this year to aid firms’ reporting of CBTL aggregate data. We will also publish any further details for firms needing to register with us to undertake CBTL activity on our MCD webpage.

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