New buy to let mortgage rules came into effect in September 2017, and research by Shawbrook Bank shows that over a quarter (28%) of landlords are unaware of the changes. Of the landlords that are aware of the changes, 61% of them said that they had no clear idea about the details of the new rules.
The changes were introduced by the Prudential Regulation Authority (PRA), part of the Bank of England. The new regulations affect portfolio landlords with four or
more mortgaged properties. The PRA has asked Lenders to apply stricter affordability rules when assessing commercial mortgage applications from landlords. The level of rents charged must more than cover the cost of mortgage repayments with many lenders requiring rents to equal 125% to 145% of the mortgage payments. Some lenders may also consider a landlord’s other income.
The changes also affect landlords who are remortgaging property. Some may find it more difficult to remortgage. Landlords with three or fewer houses should not be affected.
The research has highlighted that there needs to be more education for investors about any regulatory changes. The National Landlords Association website has articles and resources about issues that affect landlords.
Mortgage brokers are keeping up with the changes and can advise portfolio landlords on what they need to do to qualify for new commercial mortgages. They can then find a suitable mortgage deal to enable landlords to remortgage existing properties or finance new property purchases.