Stringent new rules for mortgage lending to buy-to-let investors with multiple properties could mean that some can no longer borrow to fund their business, Telegraph Money research has found.
Buy-to-let investors with four or more properties will find it harder to raise finance from the end of this month when tough lending regulations are introduced by the Prudential Regulation Authority, part of the Bank of England.
Landlords who seek finance after October 1 will have their entire property portfolio assessed for viability, as opposed to just the individual property concerned, as is currently the case.
Brokers surveyed by this newspaper said the changes would mean, at best, a huge increase in the amount of work landlords will have to do when they apply for a mortgage and, at worst, some landlords struggling or failing to get a loan at all. The market could also shrink as banks abandon this part of the market entirely. This would be likely to lead to higher fees and interest rates.
One of Britain’s biggest lenders, Santander, has already told mortgage advisers that it will cease lending to landlords with large portfolios who want to increase their borrowings. It will continue to lend for the purposes of “pound-for-pound” remortgaging, but even then only with tighter rules around purchase date and income.
Shaun Church of Private Finance, a broker, said: “Already we are seeing the mainstream lenders taking very different approaches to how they will work with these borrowers.
“Some are saying that if you have four or more properties we aren’t going to lend to you at all – probably because they don’t have the resources to deal with the extra workload. In the middle some are saying we will lend but it’s going to become much more complex.
“Then some of the more specialist lenders are more or less enforcing the rules already so there won’t be much change.”
Ray Boulger of John Charcol, another broker, said some smaller lenders such as Platform Home Loans had announced that they would no longer be carrying out this sort of work, while other, specialist lenders would be largely unaffected.
The new rules will apply only to individual landlords, not to those who own their portfolio through a limited company.