Stricter Buy To Let Lending Rules To Apply From 30 Sept 2017

The buy-to-let burden continues with additional stringent rules to apply to private landlords as of 30th September 2017.

In September 2016 the Bank of England issued a press release which outlined that buy-to-let mortgage lenders (that are regulated by the Prudential Regulation Authority) will have to implement certain restrictions on lending criteria from 1 January 2017. These initial changes included stricter affordability tests including interest cover ratio including the impact of recent tax changes and a stress test on interest rate rises.

In addition, the Prudential Regulation Authority has made a proposal to impose additional rules on private landlords/buy-to-let investors, which will be implemented, as of 30 September 2017.

The new rules basically mean that lenders will be forced to apply stringent rules against applications for buy-to-let mortgages, by private landlords, with four or more mortgaged properties.

1. Lenders may be forced to review a landlord’s entire portfolio, when offering a mortgage on a single property.
2. Lenders may require proof of rental income and a business plan to support a new application.
3. Landlord borrowers could find the amount they can borrow will be restricted, if they fail a “stress test” across their portfolio.

The new rules are clearly part of the government’s crackdown on the buy-to-let market. It will be interesting to see how the new rules apply in practice, especially in cases where properties are, for example, held directly by an individual or via a limited company because it is currently unclear whether all properties would be taken into account. And, it may be advisable for those who are currently considering making a mortgage application to apply now before the new rules are implemented.