Posts with tag: PRA

Half of Buy-to-Let Brokers still Unaware of PRA Changes

Published On: September 12, 2017 at 9:35 am

Tags: buy to let mortgages,portfolio landlords,PRA,PRA changes

Almost half (46%) of buy-to-let brokers are still unaware of all they need to know about the upcoming PRA changes (Prudential Regulation Authority) for portfolio landlords, found new research from Kent Reliance, which is part of specialist lending group OneSavings Bank (OSB).

Half of Buy-to-Let Brokers still Unaware of PRA Changes

The PRA changes, which were announced in September 2016, will see a new minimum underwriting standard being introduced for landlords with four or more mortgaged buy-to-let properties from 30^th September 2017.

Under the new rules, portfolio landlords – and their brokers – will need to provide detailed information on the cash flows and costs arising from multiple tenancies.

However, with less than a month to go until the deadline, the survey of more than 200 buy-to-let brokers found that 46% still don’t understand everything they need to. One in ten (13%) admitted that they were aware of the changes, but not when they are coming into effect, while nearly a third (31%) had heard of the new PRA changes, but didn’t fully understand how to apply them to their business, and just 2% hadn’t heard of them.

Those brokers that are already in the know are optimistic about the opportunities that the new framework will create. A third (29%) believe the PRA changes will increase future opportunities, compared to 14% who think that they will reduce overall buy-to-let transactions.

Whatever the eventual outcome, some teething pains are expected. A third (29%) of brokers anticipate that more applications will be rejected in the short-term, a quarter (23%) believe that the extra administrative burden will cause the application process to slow down, with just 4% predicting that it will have no impact at all.

Adrian Moloney, the Sales Director of OSB, says: “Brokers have had to get to grips a with a huge amount of regulatory change over the past 18 months, including seismic changes to mortgage tax relief and Stamp Duty, so it’s understandable that some are still playing catch up, but, with the PRA deadline looming, now is the time to buff up on the new rules and make sure clients are ready to comply.

“For those that still don’t feel confident in what these changes mean for their business, the time to get on top of it is now, and we would encourage them to contact us as soon as possible so we can make the transition into the new landscape seamless for their business.”

Are you ready for the new rules?

Be Prepared for New Buy-to-Let Portfolio Rule Changes this Month

Published On: September 1, 2017 at 9:30 am

Author: Em Morley

Categories: Finance News

Tags: portfolio landlords,PRA,underwriting changes

This month, the Prudential Regulation Authority (PRA), which is part of the Bank of England (BoE), will start to enforce tougher lending standards on buy-to-let portfolio landlords – those with four or more mortgaged buy-to-let properties.

We have created a guide for landlords on the new rules: /landlords-guide-pra-portfolio-underwriting-changes/

Be Prepared for New Buy-to-Let Portfolio Rule Changes this Month

Although the new buy-to-let portfolio rule changes are due to be introduced from 30^th September 2017, some lenders will apply the new rules from today, 1^st September.

We’ve spoken to London estate agent Portico about the upcoming buy-to-let portfolio rule changes.

The agent’s Regional Director, Mark Lawrinson, comments: “Under the new rules, if you want to make an application for a buy-to-let-mortgage on a new rental property, the lender will have to look at your entire property portfolio when they decide what mortgage deal they can offer on a single property.

“For example, 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.”

He continues: “As of 30th September, lenders will also require a full breakdown of rental properties, a business plan, and cash flow projection to support a new application.

“As a result of the new buy-to-let lending changes, we may see a surge of rental stock come back on the market for sale, as landlords look to offload their weakest performing properties in order to get further lending on more potentially profitable properties.

“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.”

Seasoned landlord and the London representative for the National Landlords Association (NLA), Richard Blanco, had this to say: “Landlords who want to remortgage or capital raise before being assessed through the new criteria will need to get their skates on. They may be too late for some lenders, who are applying the new rules from Friday 1^st September.

“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.”

He adds: “Landlords are gradually waking up to the fact that they are having to borrow at a much lower loan-to-value [LTV], so they may not get further advances because rental coverage has to be much higher. If their regular lender has decided not to do business with portfolio landlords, they may need to take their business elsewhere.”

Portico also asked mortgage experts Capricorn Financial who the new buy-to-let portfolio rule changes will affect: “A few lenders are likely to withdraw from this arena as a result of the new rules. Santander have already indicated they will not lend to portfolio landlords for purchases or additional borrowing, while others have improved their offering through brokers – NatWest, for example, have gone from a maximum of four properties to ten.”

The new lending changes come on top of tighter stress tests for buy-to-let landlords, which came into force in January this year.

A Landlord’s Guide to the PRA Portfolio Underwriting Changes

Published On: August 31, 2017 at 8:05 am

Author: Em Morley

Categories: Landlord News

Tags: mortgages,portfolio landlords,PRA,underwriting changes

Earlier this year, the Prudential Regulation Authority (PRA), which is part of the Bank of England (BoE), launched phase one of its underwriting changes for buy-to-let mortgages. The upcoming phase two will include portfolio underwriting changes for landlords who own four properties or more.

Phase one introduced stricter affordability tests for lenders to impose on landlords, including a stress test on interest rate rises.

A Landlord’s Guide to the PRA Portfolio Underwriting Changes

All those in the mortgage and property investment markets must be aware that, from 30^th September 2017, phase two will be launched.

The PRA will require changes to the way that mortgage applications are underwritten for portfolio landlords – those with four or more mortgaged buy-to-let properties. The reason for this measure is that the PRA has found that mortgage arrears rates increase as landlords’ portfolio sizes grow.

Any borrower that falls into the portfolio landlord category will be required to pass specialist affordability checks when the portfolio underwriting changes are introduced.

The PRA has not outlined a specific requirement for lenders, but has detailed that they should take the following into account: a landlord’s experience; their full portfolio; their rental income; any outstanding mortgages; their assets and liabilities. They should also take into consideration the merits of any new lending in accordance with the landlord’s business plan, alongside historical and future expected cash flow.

The PRA is not concerned with recent landlord tax changes.

If you’re a portfolio landlord, lenders will need to make sure that you are not over-exposed and will therefore stress your background portfolio from 30^th September. This means that they will take your entire property portfolio into account when making a decision on your mortgage application.

At present, not all lenders have outlined how they will apply the PRA’s guidelines, but you can expect them to assess the following:

Your property investment experience
The total amount of mortgage borrowing you have across your portfolio
Your assets and liabilities – including tax liability
The merits of any new lending in context of your existing buy-to-let portfolio, along with your business plan
Historical and future expected cash flow from your portfolio
Your income – both from your portfolio and elsewhere

When applying for another buy-to-let mortgage, you should be prepared to be asked for the following: your up-to-date property portfolio spreadsheet; a business plan; cash flow forecasts; your last three months’ bank statements; submitted tax returns; and potentially income and expenditure statements for your portfolio.

If you are a portfolio landlord and plan to take out another buy-to-let mortgage, you must be ready for the additional tests.

To be in the best position, we advise getting your paperwork in order and ready for the application process. As ever, it’s important to keep your property portfolio spreadsheet updated.

If you are planning to review your portfolio, it’s probably a good idea to do this sooner rather than later.

Whatever your plans, be aware and ready for the portfolio underwriting changes!

BM Solutions Announces Criteria Change Ahead of New Portfolio Rules

Published On: August 23, 2017 at 9:50 am

Author: Em Morley

Categories: Finance News

Tags: mortgages,portfolio landlords,PRA,underwriting changes

BM Solutions Announces Criteria Change Ahead of New Portfolio Rules

BM Solutions is the latest lender to announce its criteria change ahead of new portfolio underwriting rules for buy-to-let landlords.

The lender has set out the details of its criteria change ahead of the introduction of the Prudential Regulation Authority’s (PRA) tougher underwriting standards next month.

To fully understand the new requirements for portfolio landlords, this handy guide explains everything you need to know: https://www.justlandlords.co.uk/news/portfolio-landlord-underwriting-changes/

From 30^th September, BM Solutions will accept a maximum of ten mortgaged buy-to-let properties per applicant, and up to three properties with Lloyds Banking Group.

Under the lender’s criteria change, portfolio landlords will now need minimum earnings of £30,000 earned taxable income per portfolio application, while it will not underwrite portfolios with a maximum aggregate loan-to-value (LTV) ratio above 75%.

The lender has also announced that it will tighten its minimum portfolio affordability requirement by 5%, to 145%.

Applicants with at least four mortgaged buy-to-let properties will have to provide more information when applying for a loan through BM Solutions, including proof of income and supporting documents, but there will be no changes to the lender’s existing process for landlords with three or fewer mortgaged buy-to-let properties.

The Head of BM Solutions, Phil Rickards, comments on the criteria change: “From this week, we are speaking to several thousand brokers up and down the country, covering the new criteria in detail and helping show how it will translate into real time for their businesses.

“There are still a few places remaining, so those still looking to attend should contact their BDM as soon as possible.”

If you are a portfolio landlord or are looking to expand your portfolio, you must be aware of how the PRA’s underwriting changes will affect you when applying for another mortgage.

You can keep up to date with how lenders are reacting to the requirements at Landlord News.

OneSavings Bank Outlines Plans for PRA Portfolio Changes

Published On: August 18, 2017 at 8:15 am

Author: Em Morley

Categories: Finance News

Tags: mortgages,portfolio landlords,PRA,underwriting changes

OneSavings Bank Outlines Plans for PRA Portfolio Changes

OneSavings Bank (OSB) has outlined its new lending criteria plans for portfolio landlords, to help brokers prepare early for the upcoming second phase of the Prudential Regulation Authority (PRA) portfolio changes, which will come into effect on 30^th September 2017.

The specialist lending group, which includes the Kent Reliance and InterBay brands, will now require portfolio landlords with four or more mortgaged properties to provide a business plan, assets and liabilities statement, and cash flow statement in support of any mortgage application.

Details of the borrower’s wider buy-to-let portfolio will also need to be provided and assessed as part of the underwriting process.

To enable this, brokers will be able to submit borrower information via the new buy-to-let hub – a dedicated submission platform developed in partnership with eTech. The platform will offer brokers a simple dashboard that streamlines portfolio stress testing and income coverage ratio assessment, which will help to provide a rapid response to loan applications.

Portfolio landlords will be subject to an interest rate stress test of 5% on the rest of their portfolio and must meet or exceed a rental cover ratio of 125%.

The Sales Director of OSB, Adrian Moloney, comments: “Brokers have had to move quickly to update their advice following a raft of tax and regulatory changes to the buy-to-let sector, and will need to do so again once the upcoming portfolio landlord changes land in October. There’s no doubt that greater scrutiny on loan affordability will be a good thing for the sustainability of the sector, but it will also mean more of an administrative burden.

“OSB will keep things simple for brokers. We’ve always welcomed portfolio landlords and the changes here cement our position as the lender of choice for these borrowers. We’ve chosen to announce our criteria well ahead of the October deadline, to help brokers prepare for the changes in good time, so they can feel confident when preparing clients to submit a portfolio application. Together with the new buy-to-let hub, we’re doing all we can to transition brokers and their clients into the new landscape with the minimum of fuss.”

Find out how other lenders, including NatWest, Leeds Building Society, Paragon and Aldermore, are reacting to the PRA portfolio changes and keep up to date at Landlord News.

NatWest will “Continue to Support” Portfolio Landlords

Published On: August 10, 2017 at 9:55 am

Author: Em Morley

Categories: Finance News

Tags: mortgages,portfolio landlords,PRA

NatWest has revealed an overhaul of its underwriting processes for portfolio landlords ahead of September’s regulatory changes for investors with four or more properties, but insists that the reforms will “continue to support” these landlords.

NatWest will “Continue to Support” Portfolio Landlords

From 11^th September 2017, the lender will require additional information on landlords’ other residential and buy-to-let properties, to enable it to undertake a full affordability assessment, with the same stress rate applied to all other mortgages, in addition to the existing application.

The rules, which are being introduced ahead of the Prudential Regulation Authority’s (PRA) deadline for tougher underwriting standards on 30^th September, will see brokers offered access to an improved buy-to-let calculator hosted on NatWest’s intermediary website, created to make it simpler for them to assess customers’ affordability.

A new valuation service will also be introduced to assess rental demand and rental income for all other properties being let, with the results used to validate customer affordability.

NatWest’s interest coverage ration will be reduced from 5.5% times 145% to 5.5% times 135%, and the lender will continue to top-slice if there is a rental shortfall, taking into account any free personal income the applicant may have.

All customers will be required to meet NatWest’s standard buy-to-let minimum income of £25,000, while the maximum aggregate customer borrowing permitted will be raised, from £2m to £3.5m.

The Head of Intermediary Mortgages at NatWest Intermediary Solutions, Graham Felstead, comments: “The buy-to-let market continues to be important for customers and brokers, and it’s one that we will continue to support.

“The new PRA requirements have given us the opportunity to review our whole approach to the buy-to-let sector, and I am delighted that we will continue to lend to both non-portfolio and portfolio landlords, with an enhanced proposition for intermediaries and their customers.”

He continues: “With any change comes an element of uncertainty, but by making our intentions clear now and developing our calculator, we hope that brokers and their customers can be reassured that they will be able to count on NatWest as one of their key lenders in this market.

“We will communicate clearly with intermediaries over the coming weeks about what changes they need to make and what we will be doing differently so that we can have a smooth transition come 11^th September, when these changes are implemented.”

Leeds Building Society recently revealed its buy-to-let portfolio plans, while Paragon and Aldermore have already announced their stances.