Landlords face strict lending criteria and higher interest rates as banks crack down on buy-to-let mortgages.
As experts fear that property investors are cashing in on the cheap interest rates, high street lenders are reducing the amount that can be borrowed by landlords and increasing interest rates. For many, this will mean having to pay a larger deposit on properties. Stricter lending criteria were introduced for those buying a property to use as their main residence in April 2014, with landlords now facing the same tests. Lenders will be looking at the affordability of buy-to-let investors, putting extra checks in place to make sure they have sufficient income.
The City watchdog didn’t previously regulate buy-to-let loans, so landlords didn’t face close scrutiny. Buy-to-let mortgages represent 20% of new home loans, with 1.6 million of the two million landlords in the UK having a mortgage. In 2014 100,000 landlords bought properties, borrowing £27.4 billion to do so. Landlords could previously claim back the interest paid on buy-to-let mortgages against their profits, with tax relief available up to 45%. The Chancellor, George Osborne, announced changes which restricts the tax relief to 20%.
Barclays has announced that they won’t lend to a landlord if they believe that they are relying on rental income to live on and cover general living expenditure. Buy-to-let mortgages are a specialised area, but mortgage advisers who have taken a CeMAP Course have all the relevant and current information available so that they can help you find the right product.