EU tells accidental landlords they "can't afford" cheaper mortgages

EU tells accidental landlords they

A little-known piece of EU legislation could see so-called accidental landlords refused cheaper mortgages - because they can't afford them.

The EU Mortgage Credit Directive, which comes into effect in the UK this month, is designed to prevent ‘risky’ mortgage lending and redefines landlord mortgages as “consumer lending”, making them subject to stricter lending criteria.

The directive introduces new mortgage affordability checks for lenders designed to ensure borrowers can afford their repayments - not just at their initial rate but also if rates were 6-7% higher.  

The same rules will apply for those who are remortgaging too, meaning home-owners  switching mortgage deals to take advantage of lower rates could be told that they are unable to afford repayments cheaper than those they are currently making.

The move is likely to particularly effect so-called ‘accidental landlords’ – people who did not buy a property with the intention of renting it out, but who have been forced to do so by circumstances.

Research from Direct Line has shown that 62% of new buy-to-let mortgage applicants are unaware of the changes – a figure rising to 71% for accidental landlords.


From next year changes to mortgage tax relief will also mean landlords are no longer be able to claim tax relief on mortgage repayments. Instead of deducting mortgage interest repayments from their tax  bill they will instead receive a tax credit equivalent to 20% basic-rate tax on the amount – meaning that should interest rates rise some landlords could end up paying tax on losses.

Ajay Jagota, founder and Managing Director of North-East based sales and lettings firm KIS commented: “It sounds completely ludicrous for lenders to deny people cheaper mortgages because they can’t afford them, and there’s a good reason for that – it is completely ludicrous.

There is no question that this directive will create mortgage prisoners, people stuck overpaying on loans at a time when mortgage rates could be falling to their lowest ever levels.

Literally anyone can end up an accidental landlord – through inheritance, through family breakdown or through having to relocate for work. Most of the time they have no ambition other than to cover their costs until their circumstances change and there’s a real risk that they might have to raise their rents just to cover those costs.

Lenders should have the right to waive the affordability criteria when they’re remortgaging if there’s no increase in borrowing. If nothing else, this directive seems to fly in the face of EU’s commitment to a free market by denying people access to the full range of financial products available to them.”

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DmitriKara
DmitriKara 29 Jun 2016

I just read another article about eviction rising and this was exactly what was on my mind, Housing has become "cat and mouse"...

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DmitriKara
DmitriKara 29 Jun 2016

I am really not surprised. I've seen one too many impudent tenants and in my humble opinion renters have one too many privileges and options to abuse heir landlord in so many ways...

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DmitriKara
DmitriKara 29 Jun 2016

There is still so much uncertainty and I will surely step back and see what's happening before I could make any decisions on my end.

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ChristinaReedUK
ChristinaReedUK 20 Jun 2016

I don't understand why it's always a war between the two sides. Either, way the landlord is probably keeping a detailed inventory and will see the changes you've made. I just don't understand why there...

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NathanGreen
NathanGreen 16 Jun 2016

Seeing that the tenants are quite satisfied with their landlords and the properties is indeed great. I wonder, though, what is the situation in London alone? The tenants face sky-high rent levels in the...

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AndiMur
AndiMur 15 Jun 2016

TheGuardian published the same forecast. But on the other hand, professional brokers express different opinions. According totranio.com, an exit from the EU would not affect the demand/supply imbalance...

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Gary Holmes
Gary Holmes 14 Jun 2016

Having a professionally completed inventory at check-in and check-out is clearly (to me at least) of minor value. Tenants make un-authorised modifications and/or walk off with items that belong to the

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Violet Gibson
Violet Gibson 14 Jun 2016

Cautious people think buying off-plan is reckless, but over the past few years investors have literally made fortunes.Pre-release prices have obvious benefits for the developer, who gets instant finance...

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Kate Windleton
Kate Windleton 14 Jun 2016

An interesting research indeed. I guess that is in complete contrast with the United States where people often move from one coast to another. It will be interesting to hear the trends for people moving...

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NathanGreen
NathanGreen 14 Jun 2016

I think it all depends on the market conditions and how well your company is doing. You will agree that you can't demand more when you're killing yourself just to hang in there. Sometimes you need all

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ChristinaReedUK
ChristinaReedUK 13 Jun 2016

What does "detecting a bad vibe" mean actually. I've had certain vibes like these and yet have always found a reason , if there's any, why I don't like a certain property. The property maintenance might...

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keybanks estates
keybanks estates 08 Jun 2016

Great News for first time buyers, about time two!

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