Why are most BTLs not FCA regulated?
This is a great question, that we actually get asked a lot, so let’s get right to it…
Quite simply, the vast majority of buy to let mortgages are not regulated by the Financial Conduct Authority (FCA) because they are considered to be a business transaction and are therefore not eligible for the FCA’s consumer regulations, which aim to protect the general public. So quotes we send you will often state that the “product is non-regulated” for example.
This is irrespective of the size or stature of the lender. For example, a HSBC buy to let being purchased for an unrelated tenant would be a ‘non-regulated’ product, the same would apply for Santander or Lloyds Banking Group, even though they are regulated lenders (often by the FCA (Financial Conduct Authority) and the PRA (Prudential Regulation Authority)).
As you can imagine, most applicants for buy to let mortgages are landlords who are looking to refinance a buy to let or expand their investment property portfolio. Therefore the mortgage is classed as a business transaction and is not liable for the additional restrictions, eligibility assessments or consumer protection that the FCA’s regulations dictate.
But are there any types of buy to let that are regulated?
Yes, there are some exceptions and here’s where it can get a little more complex…
One such exception is what is referred to as a ‘Consumer Buy to Let’. A fairly new category of mortgages that aims to protect “accidental” landlords – as opposed to professional landlords.
A perfect example of this would be someone who has inherited a property and now intends to rent it out. Another common scenario is letting out a property to an immediate family member as the tenant. These scenarios can be restrictive and certain lenders do not lend where these examples are the case.
Any application that falls into this category of Consumer Buy to Let would be covered by FCA regulation and the transaction is treated with similar consumer protections to a traditional residential mortgage.
So why is this important?
Obviously knowing whether your buy to let falls under the FCA regulation or not, will not only impact what checks are needed in the mortgage application process, but it can very much impact which lenders and products you may be eligible for and also what deposit you may need to provide. This is why our team will ask the necessary questions from the very first call, so you’ll know exactly what you are getting and won’t waste any unnecessary time or energy on deals that are not for you.
As each and every one of our advisers is fully qualified to CeMAP standard and authorised by the FCA, whether you decide to go for a regulated or non-regulated buy to let, you will receive the same 5-star standard service and mortgage expertise.
Want to Know More about BTL Regulation?
If you still have questions and want to know more about why buy to let generally isn’t regulated, you can speak to one of mortgage brokers today. Simply let us know your contact details below and we’ll be in touch shortly.You can also call us on 08009499410.