As the FSA steps closer to regulating the buy-to-let sector, the National Association of Commercial Finance Brokers (NACFN) has called on the regulator to think long and hard before it makes buy-to-let a regulated transaction.
Chief Executive, Adam Tyler commented: “There have been numerous calls for the sector to be regulated, but I am unsure as to what people think ‘regulating the buy-to-let sector’ would actually consist of and what, more importantly, this would achieve. Many lenders have been treating buy-to-let as a regulated contract for some time now, and it certainly hasn’t prevented them or their clients from getting themselves into trouble.”
The NACFB has said that regulatory figures are refusing to acknowledge that buy-to-let is a primarily a commercial transaction and is not simple investment decision or a “get rich quick” scheme.
“A loan is to purchase a property to be rented out is a commercial investment, and as such really it is not an investment for the average consumer unless they have really done their homework.” Mr Tyler continued.
“The call for regulation is to protect novice investors who have been sucked in to investing in buy-to-let by tales of millionaire property landlords and endless television programmes on the subject, and who now find themselves with an investment falling in value and struggling to find tenants. How would regulating the mortgage used to buy this property prevent this in any way? With a buy-to-let investment, the investor will be expected to do the research to see that their chosen investment vehicle - the property itself - is suitable, is in the right location, and complies with all the necessary legislation – basically that it is a good investment. The investment vehicle for a buy-to-let is a property not itself a financial product, so the FSA will be unable to protect consumers here.”
Although the NACFB has insisted that it is not anti-regulation, it states that because it is so expensive, regulation should be intelligent and should help solve the problems it was designed to address.
“We are happy to work with the FSA to discuss potential solutions, but the current market seems to have enough problems right now and it seems a shame to spend millions on a magic bullet that we doubt will hit its intended target.” Mr Tyler concluded.