Following the introduction of stricter lending conditions introduced by the Bank of England’s Prudential Regulation Authority (PRA) last year, it is reported that an increasing number of Buy-to-Let (BTL) customers are struggling to acquire mortgages.
The changes were introduced as a two-step process; the first requiring lenders to ensure that the rental value of any property being mortgaged as a BTL was sufficiently higher than the monthly repayment with any additional costs, such as agency management charges, needing to be taken into account whilst calculating the ratio of rent to repayment. The typical coverage of 125% of the monthly mortgage repayment being required.
The second stage required portfolio landlords to go through a specialist underwriting process when obtaining new BTL mortgages, with their entire portfolio now being taken into account whilst also having to produce additional documentation such as business plans and taking into account if they are higher or lower rates tax payers as this will produce different borrowing amounts.
Now, six months on, in a recent survey by the National Landlords Association, 63% of landlords reported it is now harder to get a mortgage, with this figure increasing to 70% for portfolio landlords. Additionally 48% aware of the changes say the process has slowed down and 46% say they believe there has been a reduction in the range of products available, making many brokers across the country now reduce their BTL offering as a result-in the very near future the BTL market will be dealt with by brokers who specialist in BTL and have the contacts, size and experience to help clients through the new rules with business plans, cash flow forecasts etc.
Alastair McKee, Managing Director of One 77 Mortgages, said: “With many of our peers now shying away from what can be a very time consuming and complex process, it is important for anyone looking to obtain a BTL mortgage to be reassured that the broker they are working with not only has access to lenders via distribution, but more importantly has the required skill set to both advise on BTL products and to make the entire process from enquiry to completion as smooth as possible, as well as being suitable contacts for tax advice for any landlords and potential landlords. At One 77 we pride ourselves on these attributes, and remain confident we can guide investors and landlords through these changing times, offering the same level of service we always have.”