Buy to let landlords welcome regulation as long as it is proportionate
Added 11.03.10
The majority of landlords support stronger regulation of buy to let mortgages and advice, according to a survey conducted by LSL Property Services plc.
But not all landlords are the same, so the Treasury and FSA must resist the temptation to impose ‘one size fits all’ regulation, warns David Brown, the company’s Commercial Director.
Nearly 60 percent of the landlords surveyed favour proposals to regulate buy to let mortgage lending, believing it will provide additional protection for landlords raising finance.
Landlords are also in favour of regulating advice provided by intermediaries and introducers in respect of buy to let loans, with 59 percent saying it will help root out unscrupulous introducers and intermediaries.
Brown said: “It may be surprising that many landlords advocate further regulation - but this does reflect a general desire for additional investor protection, and if it leads to a greater professionalisation of the sector, it should be applauded.”
But while they support regulation to protect the inexperienced, 55 percent of landlords with seven or more years’ experience are opposed to the regulation of mortgage products, arguing that they don’t need the additional administrative burden.
Brown continued: “The majority of experienced property investors do not necessarily need nor want the added protection or burden of increased regulation. Most are able to secure their own finance and are skilful at managing brokers and lenders to obtain the products they need.
“Long established portfolio landlords are less likely to benefit from tighter regulation. Indeed, they see a real risk that disproportionate regulation may make force more lenders and brokers from the sector, exacerbating the current shortage of buy-to-let mortgage finance.”
While the possible impact of additional regulation is hard to gauge, the vast majority of landlords will not be discouraged from growing their portfolios if it is introduced. Just 6 percent of landlords said it would deter them.
By way of example, despite previous worries over the tenancy deposit scheme, most landlords now say this was a positive development. 62 percent of landlords are in favour of the scheme, assisting in the resolution of disputes (mentioned by 42 percent in the survey) and helping to ‘weed out cowboys’ (mentioned by 20 percent). However, the rising cost of compliance remains a concern for some.
Brown concluded: “Increased regulation would potentially help less experienced landlords, but it needs to be simple and proportionate. The FSA and the Treasury should avoid using a sledge-hammer to crack a nut. Landlords have different levels of experience, and different requirements.
“With a one size fits all approach to regulation, any benefit for inexperienced investors could potentially be outweighed by the damage to the sector if it ended up making it less attractive for larger scale landlords to invest.”
News feed courtesy of Residential Landlord