Landlords left in limbo over buy-to-let rules

Landlords left in limbo over buy-to-let rules

Landlords are being left in limbo over upcoming changes to underwriting standards that could affect their ability to borrow, brokers have claimed.

Guidelines issued last year by the Prudential Regulation Authority (PRA) mean lenders need to introduce bespoke underwriting standards for portfolio landlords – defined as those with four or more properties – by 30 September 2017.

The new standards are designed to reflect the differences between simple and complex buy-to-let (BTL), the latter of which involve cash flows and costs arising from multiple tenancies.

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But with just months to go before the deadline, brokers are growing increasingly concerned that lenders have given no indication as to what their requirements will be – meaning they are unable to give advice to their current clients.

Just 4 per cent of the UK’s landlords own four properties and 8 per cent own five or more, according to the Council of Mortgage Lenders’ 2016 Landlord Survey – but the latter group owns nearly 40 per cent of the country’s rented dwellings.

Dale Jannels, managing director at All Types of Mortgages in West Sussex, told FTAdviser: “We can’t advise our existing portfolio holders. In September, we are going to have to look at the whole portfolio. 

“Some people will require three months’ bank statements. We would like to know now and let our existing clients know. They might not be eligible for the new rules.”

Darren Meade, head of mortgages at London-based deVere Mortgages – 50 per cent of whose business is in the BTL sector - added: “The issue that we have got is that no-one is really being the first lender to say ‘this is how we are going to be underwriting and this is what the criteria are going to be’. We don’t really know the best way to help clients.

“It is difficult to give [clients] the correct advice, because we don’t really know the way forward. 

“Without any real guidance it may be difficult for the housing market, as there are not enough houses. With buy-to-let purchase growth dropping, where is the industry going to go?”

Mr Meade explained that taking into account the whole portfolio means that if one property is not making enough rental income, it may result in the next mortgage application being refused – with less affluent landlords more likely to lose out.

Under the PRA guidelines, examples of additional information firms may request from the borrower include assets and liabilities, past and projected cashflow, and the full portfolio of properties and outstanding mortgages.

Nationwide’s buy-to-let arm The Mortgage Works has already affirmed its commitment to portfolio landlords, pledging to continue to offer mortgages to this group once the PRA regulations are introduced.

Other lenders contacted by FTAdviser were keen to reassure brokers they will make them aware of their new standards in advance of the deadline –but provided little in the way of concrete details.