Mortgage Lender urges to get ready for another buy-to-let rush
Buy-to-let is far from over in the UK. On the contrary a rush of fresh buy-to-let activity has been forecast.
As always with the threat of new legislation looming on the horizon, anyone who intends having a stake in buy-to-let property is likely to try and beat the proposed deadline. In the short term this means that a flurry of activity from prospective landlords wishing to increase their portfolios can be expected within the next twelve months or at least until January 2017, which would be the earliest date for potential changes by the Prudential Regulation Authority (PRA). These rulings are being considered because the authorities want to “to insure underwriting standards did not slip”. This should have the effect of reducing buy-to- let approvals by between 10% and 20 % before 2019.
New underwriting rules by the PRA are being considered in an effort to implement stricter affordability rulings on any potential buy-to-let applicants. A consultation paper on underwriting levels of standard is being considered and debated and will if no radical changes are needed, be rubber stamped in the next month or so. If all goes ahead as planned, these new rulings will come into play soon. Chancellor George Osborne had already indicated that it was “very likely” that there would be restrictions on buy-to-let mortgages.
Fleet Mortgages point out that landlords looking to re-mortgage and arrange new backing loans will be more successful prior rather than post any new PRA ruling.
“You we will see activity levels begin to increase over the course of the year as we get closer to the implementation of the rules,” said Bob Young, chief executive officer, Fleet Mortgages.
Once the new restrictions are in place it may be more difficult for smaller investors who have limited capital, to comply with the criteria, bearing in mind possible rises in general costs and house prices. There will also be an impact on lenders and their ability to offer similar levels of funding.
The Bank of England are also proposing a change in borrowing standards to prevent what is termed as ‘overheating’ in the general UK housing market, with particular emphasis on buy-to-let. George Osborne did not admit to any collusion with the Bank of England, but did admit to a link between these proposed PRA changes and also the 3% stamp duty surcharge and intended tax relief reductions on mortgage interests.
Despite all these new rulings, there is still a lot of optimism that mortgage firms will increase their buy-to-let lending accounts. Some three quarters of lenders already meet these new levels of requirement. If investors continue to see opportunities in the buy-to-let sector, then it is expected that although there may be a slight slowing down, the future still looks profitable for those willing to invest.