In particular, it said "there is a risk that firms relax underwriting standards, thus affecting their safety and soundness. The findings suggested a need for microprudential action".
This led to the publication of its Underwriting Standards for Buy-to-Let Mortgage Contracts paper, in which it outlined new affordability tests.
Specifically, it proposed that all firms use an affordability test when assessing buy-to-let mortgage contract in the form of either a mortgage interest coverage ratio (ICR) or an income affordability test, where firms take account of the borrower’s personal income to support the mortgage payment.
It also proposed that firms consider:Â
- All costs associated with renting out the property where the landlord is responsible for payment.
- Any tax liability associated with the property.
- Where personal income is being used to support the rent, the borrower’s income tax, national insurance payments, credit commitments, committed expenditure, essential expenditure and living costs.
Top tips for helping clients through complex buy-to-let
All these changes have pushed more landlords into a complex buy-to-let bracket. Says Mr Hollingworth: "More landlords [are] having to make a wider lender search to find the right one for their needs, given the tougher regulatory requirements."
As a result, some landlords are simply jacking it all in, according to data from the Association of Residential Lettings Agency (Arla).Â
The data showed estate agents had reported an average of four landlords selling up per branch, compared with just three in February.
But for those who remain - or for those who have become 'accidental landlords' through inheritance or some other way, they will need advice on complex buy-to-let.
Here are some ways in which mortgage advisers and brokers can work with their clients, lenders and other professionals to help buy-to-let borrowers in even the most complicated circumstances.
Knowing your client
Getting to know your client has to be more than a regulatory catchphrase; it is essential to get the right investment for the right client.
 As Jamie-Smith Thompson, managing director at Portafina, explains: "The adviser needs to make sure this is the most suitable investment for the client.
"An initial, transparent conversation with the client, concerning the processes involved, is essential to ensure the client is aware of the implications of the investment journey ahead."
Special purpose vehicles
To get around the various tax changes imposed by Mr Osborne, many landlords and their advisers decided in Spring 2016 to convert their properties into a special purpose vehicle (SPV).
This means landlords can set mortgage interest against income as an expense, and benefit from lower rates of tax paid on corporation tax.Â
