Changes to criteria for portfolio buy to let landlords

Changes to criteria for portfolio buy to let landlords…

From 30 September 2017, new mortgage regulations from the Bank of England (BoE) will become effective. In the industry it is referred to as PRA phase 2.

These new regulations will mean that in many cases landlords with more than three mortgaged buy-to-let properties will have to provide much more information about all their existing rented properties and other assets, liabilities, income and costs.

What the rules mean

Currently, many lenders when underwriting buy to let mortgages focus mainly on the rental income and value of the property they are lending against. With Phase 2 of the new Bank of England underwriting requirements, when considering applications from landlords with more than three buy-to-let properties all lenders will have to collect and validate details regarding all the properties that the landlord has an interest in. This will include collecting information on property values, rental income, costs and mortgages.

The Bank of England has asked lenders to take this approach because they want lenders to make sure that they fully understand the full financial circumstances of portfolio landlords and the impact any new lending will have on their finances.

The challenges we will face

Whilst we have always asked for information on all the properties a landlord holds and on the full range of their
economic activity (so we can advice you better), not all lenders have. Going forward all lenders will be expected to collect full information on a landlord’s finances at application stage. This means that some lenders will need to ask more questions and undertake greater validation than they do today.

We expect that the industry will adapt well to these new regulations but landlords should expect that the application process will become more detailed and may take longer than has previously been the case with some lenders. If you have plans to refinance or add to your portfolio it may be an idea to consider doing this before the new rules come into effect.

What you can expect from us

We have more than 20 years’ experience as Independent Mortgage Brokers and have arranged hundreds of buy-to-let mortgages over this period. We have owned our own buy to let properties for more than 14 years too so have a wealth of experience in the industry from both a professional and a personal level.

As a result, we are very well positioned in respect of these changes and are working hard to make sure any impact on our landlord customers is kept to a minimum.

Where you can find information

If you’d like more information around the PRA affordability rules and how they will affect you, you can talk to us directly.

Stuart Brown