EU Mortgage Credit Directive

The Mortgage Credit Directive (MCD) introduced an EU-wide framework of conduct rules for mortgage activities. It's created minimum regulatory requirements that all member states must comply with to provide consistency in protecting consumers taking out credit agreements for residential property. For the Buy to Let (BTL) market, EU MCD has resulted in the creation of a Consumer BTL regulatory status.

For The Mortgage Works (TMW), the Consumer BTL regulatory status applies to a borrower with no other let properties wishing to obtain a mortgage on a property that has either been inherited or has previously been occupied by the borrower or related person at any time

This means the status will apply to the following application types:

• where the borrower or a family member has previously lived in the property, typically Let to Buy
• inherited properties.

If the borrower lets any other property at the time of the application, they won’t be classed as a consumer, even if the points above apply. This regulatory determination will only apply to remortgage applications.

When completing an application, unaffected borrowers will be asked to sign a declaration, confirming that they’re aware their mortgage will remain unregulated.

Eligibility for a consumer BTL loan

The Mortgage Works definition of a Consumer BTL borrower is “A borrower with no other let properties wishing to obtain a mortgage on a property that has either been inherited or has previously been occupied by the borrower or related person at any time”.

TMW Online will identify whether the application is a Consumer BTL loan through the questions you are asked during the application process. You must ensure these questions are answered accurately to ensure that the correct regulatory status is applied.

If your clients’ application is a joint application, then as long as one of the applicants are identified as a consumer using the definition above, it’ll be classed as a Consumer BTL loan.

The following FCA permissions are required to submit applications to The Mortgage Works:

• advising on regulated mortgage contracts
• agreeing to carry on a regulated activity
• arranging (bringing about) regulated mortgage contacts
• debt counselling (if you are submitting an application involving Debt Consolidation and Additional Borrowing)
• to submit Consumer BTL applications, you’ll need to sign up to the FCA’s new Consumer BTL register.

We won’t be able to proceed with Consumer BTL applications received from firms who aren’t on this register, so we’d strongly encourage any intermediary firms to sign up.

Foreign currency loans

EU MCD has introduced changes to the way foreign currency loans are defined, processed and managed. We don’t support foreign currency lending to new borrowers, including where the income derived from the property is paid to the borrower in a foreign currency.

Submitting a consumer BTL

You can submit a Consumer BTL application via TMW Online, however, intermediary firms must be signed up to the FCA’s new Consumer Buy to Let Register, which can be accessed via the FCA website. For firms with existing FCA permissions, this process will be fast and relatively inexpensive. We don’t have a specific product range for consumer BTL loans, so our standard range of products applies.

We hope we’ve covered most of the common questions. If you're still unsure you can contact one of our experienced advisers on Broker Chat.