Buy-to-let mortgages become tougher to obtain

April 14, 2016 by Brendan O'Neill

Landlords

Landlords have recently faced tax increases and new regulations when buying an investment property. However, they will now face more difficulties, as stricter lending criteria will be applied to those looking for a mortgage to buy an investment property.

The Bank of England has introduced the new, tougher criteria in the hopes that it will reduce the number of buy-to-let over the next three years. The National Association of Estate Agents discovered that 85% of members had recorded an increase in the number of buy-to-let properties being sold in the run up to April 2016. Existing criteria for landlords requires a 25% deposit and the rent to cover monthly repayments by 125%.

The Prudential Regulation Authority has asked lenders to check that landlords have sufficient income to be able to afford repayments on the buy-to-let mortgages. It also requested that lenders carry out affordability checks which include an increase in interest rates.

According to some experts, the new rules are premature, as the increase in lending was probably due to landlords buying properties before the new stamp duty rules kicked in during April. This will mean that investment properties will attract an extra 3% stamp duty. It is also possible that a number of landlords will sell their rental properties as the Chancellor announced that tax relief will be reduced. Experts believe that the new measures will discourage new landlords, without adding further restrictions.

CeMAP qualified mortgage advisers are able to provide advice to all buyers, helping to find a suitable mortgage for individuals, including landlords.