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Mortgage Credit Directive (MCD)

The UK sees new regulation changes to the Mortgage Credit Directive within the EU. So, how does this affect landlords in this lucrative market?

BUY-TO-LET MORTGAGE LENDING: It will affect so-called ‘amateur landlords’ most. More politely, those who are trying to obtain a buy-to-let mortgage.

They could now encounter borrowing problems because of the March 2016 authoritative instructions.

How Does MCD Affect UK Landlords?

The financial world of buy-to-let mortgages changed quite significantly in March 2016.

The times of unregulated money lending have changed. We now see much stricter ruling by the Financial Conduct Authority (FCA).

The reason is due in part to the introduction of European Union (EU) rules on borrowers. They must now get separated into one of two broad categories, namely:

  1. Professionals looking to make a living from their buy-to-let portfolios.
  2. Consumer landlords (often named amateur or accidental landlords).

The UK’s first intentions was not introduce the new laws. But, they have now accepted the Mortgage Credit Directive (MCD). The scheme targets the regulation of loans where a homeowners’ property gets used as security for the lender.

Professional or Consumer Landlords

Buy-to-let mortgage got treated in a different way to mainstream residential property mortgages. There was a rationale behind this structure. It was because landlords are usually seen as being business people, as a rule.

Landlords Face New Regulations on Buy-to-let Mortgages in the UKThis outlook suggested that they required less institutional supervision over their borrowing procedures.

Anyone who had a standard mortgage on their property would get seen a consumer. Thus, commanding stricter rules, regulations, and financial affordability checks.

The principle reason being that lenders can make certain a borrower can afford to purchase the property.

A ‘professional landlord’, for lending purposes, would be regarded as be someone with the intention of obtaining a buy-to-let mortgage for renting out a property as their main business.

You would get seen as professional landlords by lenders, if your dealings within the property market are what you consider to be your main job. You would need to declare yourself as such under the new buy-to-let mortgage rulings.

Those who never ‘purposefully’ bought a property with the intention of letting it out, are now termed ‘consumer landlords’.

Consumer landlords are often those who had property left to them. Often, through inheritance, or they are unable to sell it and then decide to rent out the property.

There is a concern for anyone looking to obtain a buy-to-let mortgage as a consumer. They may have a tougher time finding the right loan to suit their individual needs. There is likely to be fewer lending solutions on the market since the introduction of the new MCD rulings.

Benefits for Professional Landlords

But, there are benefits for those in the category of professional landlords. They are what you might call the higher end of the property spectrum.

They are likely to experience no difference whatsoever in their general business operations. That also means very little change in how they make their money. Business advisers are predicting disruption to be low for most professional landlords.


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Landlords Face New Regulations on Buy-to-let Mortgages in the United Kingdom