Alterations to buy-to-let lending criteria being introduced at the end of September are set to entice a surge of rental stock, with landlords looking to offload properties that are not giving them substantial yields.
From 30th September, the Bank of England’s Prudential Regulation Authority is set to tighten lending criteria still further, following the introduction of stress tests earlier in 2017.
Scrutiny
Mark Lawrinson, regional director of London agency Portico, believes that landlords will have their entire portfolio scrutinised when applying for additional buy-to-let funding.
‘If you have six properties and four are generating enough rental income to cover mortgage payments and then some, but the other two are not, your new mortgage application may not be approved by some lenders,’ Mr Lawrinson explained.
Lawrinson said this could signal the start of a period of rental properties coming to the market, with landlords looking to offload those generating the lowest returns.
‘The new rules could also have a knock-on effect on rental prices, as landlords look to cover any shortfalls or carry out works to a property to both increase the capital value and the rent, in turn improving the yield and the return,’ he continued.
Buy-to-let alterations could result in stock surge
Re-mortgaging
Richard Blanco, representative of the National Landlords Association, feels it could already be too late for landlords looking to remortgage before the new criteria comes into effect.
Mr Blanco observed: ‘Many lenders will unfairly assess landlords’ existing mortgages through a 145% x 5.5% prism even though they originally got their mortgages on looser criteria years ago. This could create mortgage prisoners: borrowers who are unable to switch lenders. This is a reminder that if you do remortgage to another lender, always choose one that has a good track record in switching customers to competitive follow on rates once the initial product has expired.’[1]
Concluding, Mr Lawrinson said: ‘We have certainly seen less professional landlords adding to their portfolio this year, but there is still money to be made in buy-to-let if you invest smartly.’[1]
[1] https://www.lettingagenttoday.co.uk/breaking-news/2017/9/buy-to-let-lending-changes-could-result-in-rental-stock-surge