Multi-property buy-to-let landlords face mortgage headache

The buy-to-let property market continues to be affected by clampdowns backed by both the Government and Bank of England. This time, landlords are being warned of a major mortgage headache, when new rules come into play in 2017.

From 30th September 2017 landlords will be subject to new rules that have been laid out by the Bank of England’s Prudential Regulation Authority. However it is likely that many lenders will introduce the new criteria much earlier than that.  It means that any landlord who owns four or more mortgaged buy-to -let properties will need to submit income and mortgage details on all of them, every time they refinance one, or purchase a new property. This type of affordability test has meant that the work for lenders could increase massively and some worry that lenders could even stop lending to buy-to-let property landlords.

But how does a buy-to let lender assess applicants at the moment? Currently it is based on the rental income and value of the property they are lending against.

The new rules will mean that if a lender has to review a portfolio of 10 residential buy-to-let properties, it will have to also obtain details of the rental income and mortgages of those 10 properties.

Some buy-to-let lenders have already placed restrictions on the maximum number of buy-to-let mortgages you can take out via that lender and it  is usually  3 or 4 properties, or a maximum borrowing level between  £1 million and £2 million. They may also currently not take into account mortgages from other lenders but will have to do so under the new rules.

These changes come after landlords have already suffered various other blows, including the new buy to let restriction of tax relief on interest rules, the three percent stamp duty land tax surcharge on purchases of second properties, and the removal of the wear and tear allowance, to name a few.