The financial press looked this weekend at proposals for tighter affordability checks and interest rate stress-tests for Buy-to-Let landlords. The suggestions, made by the Bank of England’s Prudential Regulation Authority (PRA), are intended to prevent borrowers getting into difficulty, although some critics have claimed the changes are further evidence of a crackdown on investors.
Under the new measures, lenders would be required to ensure that the rental income was sufficiently high to cover the mortgage and other costs. In addition, lenders should introduce a stress test to maintain affordability if rates were to increase. The report also asks lenders to carry out a more detailed assessment of other sources of income if this is needed for the mortgage.
The PRA says these new proposals would not apply to those remortgaging without increasing their borrowing, but experts suggested that it may no longer be possible for landlords to release equity in their existing properties to fund further purchases.
Despite the increasing pressures, the Times revealed that there is still an appetite for Buy-to-Let, and as the Stamp Duty deadline arrived last Thursday, an estimated £3.4 billion worth of home were sold.
For those looking to rent out part or all of their home on a more temporary basis, through increasingly popular sites such as Airbnb, the Guardian warned that borrowers could encounter problems when it comes to their lender. Many would not consent to the let of an entire property, and experts say this could lead to additional fees, higher interest rates, or even the demand to repay the whole mortgage. Those renting out a room or two could find it easier to gain consent, but may be required to ask guests to sign a consent form acknowledging the lender’s rights.
What the papers said about Buy to Let criteria