Experts discuss new rules for portfolio landlords

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At last month’s Mortgage Finance Gazette Lunch Club, officials gathered to discuss the new changes that will affect portfolio landlords, reported in July 2017.

New rules are being introduced by the Prudential Regulation Authority (PRA) in September 2017 that apply to landlords with four or more properties. When a landlord applies for a commercial mortgage, the lender will need to also look at the other properties and mortgages in the landlord’s portfolio.

Delegates at the meeting expressed concerns that the new rules are not clear enough. Landlords will be expected to provide more documentation than is currently required, but lenders and brokers are not sure exactly what documentation will be needed. There was a fear that the mortgage application process could become complicated. One meeting attendee, James Ginley, commented:

“We need addresses and rental information but beyond that it needs to be simple for the landlords, it should be off-the-shelf information for them.”

Some landlords may avoid the new rules by forming limited companies that own properties, but the meeting was told that this was not suitable for all portfolio landlords.

New stress test rules require that rents should cover at least 145% of the mortgage repayments. Richard Merrett told the meeting that landlords purchasing high price London properties would find it difficult to charge rents that equal 145%.

Despite the challenges, the consensus of the meeting was that the future of buy-to-let investing was robust for professional landlords, but some amateur landlords with one or two properties could quit the market.

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