The Financial Conduct Authority (FCA) began regulating mortgages on October 31, 2004. This applies to all regulated mortgage contracts concluded after this date. The FCA also requires lenders to submit high-level aggregated data on loans, performance, and complaints through a new independent CBTL reporting statement. This statement must be submitted quarterly and is a key source for determining the declared CBTL regulated mortgages originated by a lender. It is important to ensure that any products or activities do not fall within the regulated scope, or if they do, that the relevant entity has the appropriate permissions.
The Council of Mortgage Lenders (CML) believes that most buy-to-let (BTL) mortgages will remain unregulated since they are primarily intended for commercial purposes. These activities only require authorization if they are related to a regulated mortgage contract and there may be a relevant exemption. Paul Smee, CEO of the Mortgage Lenders Council, said that the review is an opportunity to analyze the effect of regulation and market practices on lenders and their customers. Some loans that do not fall within the definition of a regulated mortgage contract will fall under the consumer credit regime and a more detailed analysis is needed when a specialized lender grants loans to individuals.
As a result, most BTL mortgages remain outside the jurisdiction of the FCA. The FCA wants to learn more about how access to financing for mortgage loans is affecting new entrants and specialty lenders. Those who finance specialized lenders should consider the issues raised in this note early in the process of structuring a transaction. They may also want to review their operations to ensure that they are not inadvertently on the wrong side of the regulatory line. Tax changes began to be introduced gradually this year and homeowners can currently offset 75 percent of their tax bill. As a result, investors can begin to liquidate their portfolios of rental properties or try to reduce their tax bill by setting up a company through which to make their investments.
