The Bank of England’s new lending criteria, which was brought in over two stages starting in January last year, was intended to cool the buy-to-let market. Yet while some landlords may have been affected by the changes, there are still plenty of options out there.
Almost two-thirds of landlords say that it is now harder to get a mortgage since the new rules came into force. According to research by the National Landlords Association (NLA), 63% of landlords who are aware of the changes believe it makes obtaining new buy-to-let mortgages more difficult; this rises to 70% of portfolio landlords with four or more buy-to-let properties.
The research also found that 46% of landlords believe the changes have reduced the number and range of mortgage products available to them, and 48% think the finance process has slowed down the mortgage buying process.
Tougher lending criteria
The changes introduced by the Prudential Regulatory Authority (PRA) mean that landlords are facing stricter stress tests, with monthly rental income needing to cover 125% of the mortgage. In addition to this, portfolio landlords seeking new loans are required to undergo specialist underwriting processes, with underwriters looking at their entire property portfolio when considering finance.
Richard Lambert, chief executive officer of the NLA, said: “These findings show that the PRA’s changes seem to be greatly affecting the ability of landlords to find new finance and increase their portfolios…Landlords looking to add new properties to their portfolios need to be conscious of the new requirements. We suggest talking to your mortgage broker or bank before committing to any new property.”
Lenders seeking to address the problem
However, despite the tough marketplace, some lenders are helping to redress the changes. Clydesdale Bank Intermediaries have reduced some of their buy-to-let rates for a limited time. Available through brokers, rates have been cut by up to 0.40%, as its 75% loan-to-value, two-year fix now costs 2.19% with a £1,999 arrangement fee.
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Together has also lowered its rates on its buy-to-let mortgage range. The lender has reduced rates to 5.99% for its prime capital repayment customers at under 65% loan-to-value and to 6.49% for those with higher LTVs. For customers making interest-only repayments, with a rate of 6.49% below 65% LTV, and 6.99% for LTVs of 65% or more. Plus, it is one of the few UK lenders to have no restriction in overall portfolio value or volume and will take into account borrowers’ incomes so that a mortgage application is not rejected if rental payments do not meet requirements.
“As one of the UK’s leading buy-to-let specialist lenders, we are committed to supporting landlords looking to grow their portfolios in a more ‘professional’ era for the market,” said Marc Goldberg, commercial chief executive at Together.
National Landlords Association calls on lenders to incentivise landlords
The NLA’s Richard Lambert added: “These findings show that the PRA’s changes seem to be greatly affecting the ability of landlords to find new finance and increase their portfolios. Given that the private rented sector now makes up 20% of the housing market, it is vital that professional landlords are incentivised to continue providing good quality, affordable housing to those who need it.”
