2017 has proved to be another year of reform in the buy-to-let market, after the Bank of England set its sights on the sector and began its roll out of new regulation at the end of last year.
January 1st saw the introduction of stricter affordability criteria for all buy-to-let mortgages, designed to stress-test a landlord or investor’s ability to repay loans, if interest rates were to hit up to 5.5%. While economists anticipate interest rate rises increasing more moderately, from 0.25% to between 0.5% and 1.25% in the next twelve months, lenders are ostensibly proceeding with caution.
In addition, 1st October saw the introduction of a new set of requirements from the Prudential Regulation Authority, which is targeting portfolio landlords – and specifically those with four or more mortgaged buy-to-let properties.
Industry expert, Mike Perrin, Director of Sales at mortgage brokers Private Finance, explains: “Under the new rules, mortgage lenders now have to undertake a full assessment of each landlord’s entire property portfolio, rather than just analysing the single property deal relating to the individual mortgage. Lenders are also obliged to assess an applicant’s tax position when assessing their affordability.
“The repercussions of such scrutiny are yet to be revealed, but we anticipate landlords feeling under greater pressure than ever to justify every investment. This is sure to add a further layer of complication to the industry, as well as to landlords – many of whom are already the victims of burgeoning paperwork and ongoing complexities.
“There is also talk and supposition that the new rulings might result in lenders pulling out of the mortgage market, not to mention longer application times due to complicated assessments, as well as an increase in fees due to convoluted forms and processes.”
As ever, we are keen to support our landlords and investors in negotiating the financial and bureaucratic demands of the industry, but when it comes to mortgages, it is critical to work with the best possible advisors.
Mike Perrin continues: “During times of industry uncertainty and change, it is crucial to work with a broker that is both knowledgeable and experienced. We would recommend looking for a firm that harbours close relationships across the mortgage lending markets, so that they can leverage their insights and ensure that each buy-to-let mortgage application procedure runs smoothly.
“With decades of experience, my team at Private Finance are on hand to answer any questions or even have an initial chat with any landlords affected. Feel free to speak to your local Carter Jonas agent for details, or feel free to approach us directly.”
With decades of experience, my team at Private Finance are on hand to answer any questions or even have an initial chat with any landlords affected. Please feel free to call us on 0207 317 2820 or email us directly, or alternatively speak to your local Carter Jonas agent for details.