The new rules are expected to mean lenders have to impose stricter affordability measures on applicants resulting in a reduction in the amount buy-to-let landlords can borrow.
Fleet Mortgages anticipates the new rules could be introduced as early as January 2017, and landlords and their mortgage advisers may well treat the intervening period as they did the months prior to the introduction of the stamp duty changes on the 31st March.
Fleet also believes mortgage advisers will be briefing their landlord clients throughout the course of the year of the likelihood of stricter underwriting criteria impacting on the loan amounts achievable.
Fleet Mortgages believes ‘portfolio landlords’ – defined as those who own four or more properties – may be the group most affected by the intervention because of the PRA’s proposed rule that lenders must adopt a specialist affordability assessment for them. It believes this could precipitate a growing number of portfolio landlords to secure their mortgage finance in 2016 rather than waiting until 2017.
Bob Young, Chief Executive Officer of Fleet Mortgages, commented:
“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.
“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 implementation 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.
“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.
“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.”
