Rules introduced last autumn by the Bank of England’s Prudential Regulation Authority are hurting the buy to let mortgage market according to a leading lender.
Paragon says the new rules comprise the second phase of the PRA’s buy to let underwriting standards and focus on ensuring that all lenders apply more detailed underwriting principles when evaluating portfolio business from landlords with four or more mortgaged properties.
Research by Paragon shows that 46 per cent of portfolio landlords - those with four or more existing BTL investment properties - who submitted a mortgage application since the introduction of the new rules reported a reduction in the number of lenders available to choose from.
This contrasts with non-portfolio landlords - with three properties or fewer - where 67 per cent of survey respondents said that there had been no change in lender choice.
However, almost all landlords reported an increase in documentation requirements across the market, with eight out of 10 saying documentation requirements had increased and seven out of ten 10 saying they had increased a lot.
Similarly, 80 per cent of all landlords noticed an increase in lenders’ mortgage processing times. However, more than half of thoe with larger portfolios said that processing times had increased by a lot compared with just one third of smaller scale landlords.
Some 30 per cent said loan to value ratios on offer were also lower than before.
“The more detailed underwriting required on larger portfolios makes it more difficult for mainstream mortgage lenders to compete successfully for the full spectrum of professional landlord business. As a result, we’re seeing a polarisation in the market, with specialist lenders playing to their strengths, adding product features that enhance value for larger scale landlords and increasing their share of more complex, portfolio business” claims Paragon mortgages managing director John Heron.