Buy To Let Borrowing Upset On The Cards For Landlords

Portfolio landlords face another financial upset as the Bank of England tightens up the rules for buy-to-let mortgage lending.

The Bank has forced a shake-up of mortgage affordability rules as banks, and building societies have been forced to apply stricter rent cover restrictions.

Many now demand rents should cover 145% of mortgage interest payments instead of the former 125%.

Now, lenders have revealed the Bank also wants them to crack down even more on buy-to-let mortgage affordability from September 2017.

This time, portfolio borrowers will not only have to show the property they are borrowing against meets rent cover rules but that the rules also apply to any other mortgaged letting properties they own as well.

Mortgage experts fear that many lenders will pull out of portfolio lending because of the extra burden of paperwork.

Most portfolio lenders have an average of 10 letting properties, and lenders must see proof that any mortgaged do not break loans to value limits imposed by rent cover rules.

Ray Boulger, of mortgage broker John Charcol, said:

“Many lenders will find the significantly enhanced underwriting process uneconomic. 

“Although these new rules don’t come into force until this time next year, most lenders are likely to introduce them before that date. That is likely to result in many lenders withdrawing from the market.”

The rules are designed to make lending less risky should house prices fall.

Buy-to-let lenders are believed to restrict portfolio lending by limiting the number of properties a landlord can mortgage or by capping the total amount of borrowing.

The figures discussed are lending caps of between £1 million and £2 million, which limits portfolio size to four average-priced homes.