New Measures to Limit BTL Sector

Monday 23 March 2009

The measures that the EU government is about to take might prevent the buy-to-let sector from further growing even after the economy of the United Kingdom recovers. New restrictive laws might seriously limit the amount of loans and mortgages for new homes and buy-to-let properties for residential landlords. The new legislation that is being drafted in Brussels is supposed to make borrowing from banks more difficult, as the lending in Great Britain has become more conservative and cautious just as in the rest of Western Europe. Previously, UK citizens enjoyed more liberal requirements for loans such as lower deposits and interest rates as well as longer mortgages. The EU plans to prohibit compound interest, which means that banks and building societies will have fewer opportunities to invest money into the housing and buy-to-let sector. Also, their profit incentives might decrease. The UK government is taking its own measures, outlined in the report of Lord Turner. They include toughening loan requirements: borrowers with low incomes will find it hard to take out a loan as well as those with no or little deposit. The new rules will influence first-time buy-to-let investors and first-time home buyers the most.