Getting a buy to let mortgage set to become harder in the UK

Landlords in the UK are being urged to consider remortgaging before tougher buy to let lending criteria, due to be introduced in September, make it more difficult to obtain finance.

The call comes as the proportion of buy to let re-mortgage transactions, as a share of the total lending market, has risen over the last few months and as a diminishing demand for new buy to let loans has driven many lenders to slash mortgage rates.

The National Landlords Association (NLA) says the rise in re-mortgages is down to landlords looking to limit their exposure to the new buy to let tax regime.

It also point out that the forthcoming tightening of lending criteria is the latest in a series of attempts by the Bank of England’s Prudential Regulation Authority (PRA) to cool the buy to let market, following measures introduced earlier this year.

The NLA’s most recent quarterly landlord panel shows that landlords are already finding it harder to arrange mortgages, with 43% saying the process of obtaining finance has become more difficult since the beginning of the year.

Furthermore, some 53% of landlords report that they have had to provide additional evidence to support recent mortgage applications, including tax returns, cash flow forecasts, and business plans.

With just over a month before the second phase of the PRA’s underwriting standards are due to be implemented on 30 September 2017, the NLA is urging any landlords thinking about re-mortgaging not to wait any longer.

‘Since the PRA regulations were introduced in January, the marketplace is looking considerably more complex. It was always likely that lenders would start to demand more evidence from applicants, and landlords are already feeling they have to go further to prove that they can afford finance,’ said Chris Norris, head of policy at the NLA.

‘Changes to buy to let taxation will eat away at many landlords’ profits and make it more challenging for them to manage their businesses. As a result, many are looking to limit their exposure to the changes, which is why we’ve seen a rise in re-mortgaging,’ he explained.

‘However, the situation is due to worsen from September and while it may not be financially advantageous for everyone, if you’re considering remortgaging or expanding your portfolio then do so now to avoid any further difficulties,’ he added.

Jeff, who has been a landlord for 14 years and has seven properties in Lincolnshire, is one who has found that it is becoming harder to get finance because lenders view him as high risk.

‘After the 2008 economic crash, my outstanding debt changed the way lenders viewed me, and now I’m regularly either refused or charged higher rates if I want to take out finance,’ he said.