Consumer Buy to Let Regulations in the UK

In recent years, the landscape of buy-to-let mortgages in the United Kingdom has evolved, with the introduction of Consumer Buy to Let (CBTL) regulations. These regulations have been designed to offer landlords added protection and ensure transparency in the property rental market. In this article, we will delve into what CBTL regulations entail, when they were introduced, who introduced them, and the circumstances under which they apply.

When Were CBTL Regulations Introduced?

Consumer Buy to Let regulations were introduced on March 21, 2016, as part of the Mortgage Credit Directive Order. This order implemented European Union rules aimed at regulating the mortgage market, including buy-to-let mortgages.

Who Introduced CBTL Regulations?

CBTL regulations were introduced by the Financial Conduct Authority (FCA). The FCA is the regulatory body that oversees financial markets in the UK, including the mortgage market. Their goal was to create a framework that distinguishes between traditional buy-to-let mortgages and Consumer Buy to Let mortgages.

What is the difference between a CBTL mortgage and a BTL mortgage?

There is likely to be no difference in the mortgage or the lenders fees. The main difference is the CBTL mortgage is regulated by the FCA. The Lender and your Broker are obliged to complete some additional checks and to provide certain regulatory documents which may not be required for a BTL mortgage

When Do CBTL Regulations Apply?

CBTL regulations apply in specific circumstances, primarily when a landlord meets certain criteria. The key criteria for a mortgage to be classified as a CBTL mortgage are as follows:

The Landlord’s Intention: CBTL regulations apply when the landlord’s primary intention is not to run a property rental business. For instance, if an individual purchases a property with the intent to live in the property, they would typically fall under CBTL regulations.

Accidental Landlords: If you have become a landlord unintentionally, such as inheriting a property or renting out a former residence, you may also fall under CBTL regulations.

Examples of CBTL Scenarios:

Scenario 1: John, has been unable to sell his house. He has decided to let his property out. This is his only let property. It is likely John would fall under CBTL regulations

Scenario 2: Susan inherits a property and decides to rent it out to cover the maintenance costs and property taxes. Since she did not actively seek to become a landlord, her mortgage may fall under CBTL regulations.