Newly proposed underwriting rules for buy-to-let lenders as suggested by the Prudential Regulation Authority (PRA) could lead to an increase in market activity.
This is the view of buy-to-let specialist lender, Fleet Mortgages, who feel that landlords will look to secure finance before the PRA intervene.
Stricter conditions
Just last month, the PRA issued recommendations aimed at imposing stricter lending affordability measures on applicants looking for a buy-to-let mortgage. The PRA wants to see the amount of money being borrowed to be reduced,
Fleet Mortgages believes the new rules could come into place as soon as January 2017, but that some lenders will want more time to adapt to any alterations. Landlords and mortgage advisors could treat the coming months as they did in the period leading up to the stamp duty alterations on 1st April.
This period saw a surge in buy-to-let mortgage demand and activity and Fleet Mortgages suggests landlords looking to remortgage are more likely to do so before the new PRA lending criteria comes into play.
What’s more, it is feared that landlords with a large portfolio could be most affected by the changes, with many looking to secure finance in 2016 instead of waiting.
Increases
Bob Young, Chief Executive Officer of Fleet Mortgages, noted, ‘many have suggested that the recent stamp duty deadline is the only one facing the buy-to-let sector and market activity will now wither on the vine as landlords take stock of their positions for the foreseeable future.’[1]
‘The recent PRA consultation on buy-to-let underwriting actually makes it more likely that we will see activity levels begin to increase again over the course of the year as we get closer to the implantation of the rules. Certainly, given their intention to drive down the amounts buy-to-let landlords can borrow, it would be logical to think existing landlords seeking to remortgage or capital raise or both will make the most of the current market conditions which will allow them to borrow at higher levels,’ Young continued.[1]
Could PRA proposals lead to increased activity?
Compromised
Mr Young went on to say, ‘Once the new rules kick-in, landlords and their advisers may well find their ability to secure the money they want has been compromised by the stricter underwriting criteria imposed on lenders, plus of course the likelihood that increased capital requirements will also impact on lender’s ability to offer the same levels of funding. It all adds up to the potential for renewed vigour in the buy-to-let sector, especially for those who may be deemed portfolio landlords, given the special affordability requirements they will face next year.’[1]
Offering advice to landlords, Young stated, ‘Our advice to advisers is to make sure any clients with these circumstances are contacted and they are made aware of how the lending landscape might change in 2017. Those in a position to make their new mortgage arrangements now are likely to find a much more hospitable lending environment, rather than waiting for lenders to implement these new rules and ultimately for them to end up disappointed.’[1]
[1] http://www.propertyreporter.co.uk/landlords/could-new-pra-proposals-reignite-market-activity.html