The chief executive of financial consultancy Clayton Euro Risk says changes soon coming in to tighten the criteria applied to buy to let mortgage borrowers may be too much for many private landlords to bear.
Last week Estate Agent Today reported that the Bank of England’s Prudential Regulation Authority was confirming rules saying that mortgage lenders should take into account a borrower’s costs including tax liabilities and verified personal income, and should extrapolate them to see how they would look if interest rates rose to a notional 5.5 per cent or more.
The ultimate stress test would be whether the landlord could cover 125 per cent of the mortgage through rent, at that notional higher rental level.
But writing in Mortgage Introducer, Clayton’s chief executive Tony Ward says: “I feel the beleaguered buy to let market is under fire and these requirements are a step too far.”
He insists landlords have already faced a tough year from regulators with the additional three per cent surcharge introduced on BTL property purchase prices in April and reduced tax relief on BTL mortgage payments from 2017.
Ward also questions the Bank of England’s concern that a wider economic recession could trigger a buy to let sell-off - hence its call for greater stress-tests.
“Where is the evidence that a downturn in the housing market would prompt a sell-off? The number of buy to let mortgages in arrears is proportionality a lot lower than residential mortgages” says Ward.
“I agree with those brokers who have criticised the changes, arguing that they are an attack on small landlords who may struggle to pass the affordability tests. This feels like the regulator is looking to, if not prosecute, then certainly rein in the buy to let market very, very hard” concludes Ward.
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This government and shelter obviously want to remove private rental from the market as they are hitting landlords and agents everyway, will they be happy when there are more homeless as landlords do not buy and others sell, the councils already have big issues in what properties they have and are unable to house people.
I agree that shelter, Citizen Advice Bureau should see both sides of the coin before making judgement. As landlords, we seek help from both these organisations and were treated like an enemy, no help at all. But they advise unlawful tenants how to avoid paying rent and take full advantage of the law. For example: the tenants create unlicensed HMO and unapproved sublet, cashed the rental to their benefits. We took 8 months to evict the tenants. Why CAB and Shelter did not select the right tenants to help? When they seek for help, they should provide their ID and names, as an example. Not everyone can call and plead innocence to learn tricks!!!
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