The National Landlords Association is urging landlords thinking about remortgaging to do so before new regulations from the Prudential Regulation Authority come into effect next month.
Guidelines issued by the PRA last year, which come into effect on the 30th September, will require lenders to consider a landlord’s whole portfolio when assessing the affordability of any new mortgage loan to portfolio landlords, defined as those with four or more properties.
According to the NLA’s most recent Quarterly Landlord Panel, landlords are already finding it more difficult to arrange new mortgages, with 43% reporting that the process has become more difficult this year.
More than half of those landlords surveyed, 53%, also reported having to provide additional evidence in support of recent mortgage applications, including tax returns, cash flow forecasts and business plans.
The NLA sites one landlord who has already been affected by these new lending conditions.
He said; “After the 2008 economic crash, my outstanding debt changed the way lenders viewed me, and now I’m regularly either refused or charged higher rates if I want to take out finance.
“Lending regulations and policy need to be changed in order to incentivise investment in rented housing and return the market to a healthy level. The PRA’s new standards will only make things worse and make it harder for small scale landlords like me who are in a position to provide a valuable source of housing”.
Commenting on the findings, Chris Norris, Head of Policy at the NLA, said; “Since the PRA regulations were introduced in January, the marketplace is looking considerably more complex. It was always likely that lenders would start to demand more evidence from applicants, and landlords are already feeling they have to go further to prove that they can afford finance.
“Changes to buy-to-let taxation will eat away at many landlords’ profits and make it more challenging for them to manage their businesses. As a result, many are looking to limit their exposure to the changes, which is why we’ve seen a rise in re-mortgaging.
“However, the situation is due to worsen from September and while it may not be financially advantageous for everyone, if you’re considering re-mortgaging or expanding your portfolio then do so now to avoid any further difficulties”.
This month BM Solutions became the latest lender to toughen their mortgage criteria ahead of the PRA regulations coming into force.
If you’re a landlord who is struggling with their finances, or you’re considering selling properties as a result of recent tax and regulatory changes, contact Landlord Debt Advisory on 0161 222 4311 or go online to www.landlorddebtadvisory.com/contact-us/ to arrange an initial free consultation.