The buy to let sector has seen a number of changes in recent years. This has been a challenge for landlords, lenders and advisers alike during a period of adaptability, flexibility and resilience.
But with the Prudential Regulation Authority’s (PRA) second phase of new underwriting standards for buy to let lending coming into effect on 30th September, there is further in store for the sector. Some lenders are already making announcements regarding their approach to buy to let portfolio lending, which means landlords need to prepare now.
What exactly is changing?
In line with guidance set out by the PRA, from 30th September 2017 landlords who have four or more mortgaged buy to let rental properties will be considered as portfolio landlords by lenders. The PRA expects all firms that conduct lending to portfolio landlords to use a specialist underwriting process that takes into account complex borrowing scenarios.
This will require the entire portfolio to be underwritten when applying for a new buy to let mortgage, even if the other mortgages are with a different lender. Lenders will also be required to use additional affordability tests on portfolio landlords and will require additional documentation to support applications.
How can landlords get ready?
Specialist lenders, already experienced in using a similar underwriting approach, have been clarifying their stance and assessment criteria. Outside of the specialist lending market, the majority of mainstream buy to let lenders have yet to confirm their plans, aside from The Mortgage Works who will continue to support portfolio buy to let lending going forward.
Industry commentators have raised concerns that the upcoming rule changes and a lack of support from larger buy to let lenders, could ultimately reduce the availability of loans to portfolio landlords and increase the price of lending.
There is likely to be more clarifications in the coming weeks leading up to 30th September and many experts are calling for quick clarification where possible. Landlords will need to keep up to date on lender announcements regarding portfolio lending. Depending on your situation, some of these stances may affect your current or future plans.