New Buy To Let Changes - More Hoops To Jump Through
So the new PRA changes have been implemented last month in regards to portfolio landlords and as usual it has initially become a bit of a minefield for lenders. It seems a lot of lenders are not sure how to react to the changes. The long and short of the changes are now clients that hold 4 or more properties are to be seen as a portfolio landlord, which in turn means tighter affordability checks as well as tighter stress testing. This means portfolio landlord mortgages become a lot more complex as lenders have to assess the whole portfolio to be able to do any lending. There has been two ways lenders have reacted - 1. Some lenders have completely pulled out the portfolio landlord market altogether, including a number of high street lenders. 2. The remaining lenders have created their own process and guidelines.
The problem with the new guidelines for the consumer is as follows.
- Due to lenders pulling out of the market there is less competition creating an overall increase in rates available for portfolio landlords.
- With the affordability assessments becoming tighter on portfolio landlords existing landlords will be stuck with particular products and may not be able to go to the market in certain situations (currently a position I have a number of clients in). So become a prisoners of the existing lender.
- Consumers won't be able to borrow as much when purchasing new properties reducing competition in the market. This creates an unfair playing field essentially making it easier for the high net worth's and corporate companies to attain properties.
- Similar to point two but now lenders have to assess the whole portfolio, the consumer could be stuck with their existing products and not have a fair look at the market.
- Due to the increased admin for advisors as well as the increased complexity fees across the board will probably be increased for portfolio landlords.
I touched on these problems with a previous post and discussed how this will be the collapse of the London Buy To Let market. See Link https://www.mesafc.co.uk/articles/collapse-of-the-buy-to-let-market-in-london-2
I understand that the consumer needs to be protected but it seems that these changes are government pushed to assist with freeing up more housing over the next couple of years. This along with additional stamp duty and the reduction of being able to offset interest in clients tax return will see a lot of landlords withdraw from the market in the coming years. These changes are also effecting non-portfolio landlords as a lot of lender are now looking at affordability based lending as opposed to lending based on rental income. Due to these changes it is important for consumers to seek advice from a broker more than ever. If anybody has any questions or thoughts then please feel free to get in touch.
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