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New lending rules risk choking buy to let investment

Sarah Davidson of thisismoney.com recently discussed the issue in an ebook put together by landlord insurance provider, HomeLet.  But how will the new changes affect landlords?

The possible impact

In news that may concern landlords, a study completed by Property Partner has suggested that the new rules could significantly increase the deposits that landlords need to raise in certain parts of the country. It claimed that investors in more than two thirds of major cities and towns may have to put down deposits of 40% or more. In some places, buy to let investors might have to raise deposits of 60%.

According to Property Partner, the worst affected area would be Worcester in the West Midlands. This is because average house prices in the city are £188,694, while average rental yields are just over £490 a month. If the tougher lending rules are adopted by all mortgage providers, this would mean that landlords in Worcester would need deposits of 61%.

Raising financial barriers

Commenting on the research, chief executive of Property Partner Dan Gandesha suggested that the squeeze on lending will increase the financial barriers facing landlords. He noted that investors have also been hit by a 3% increase in stamp duty surcharge for buy to let properties and second homes (which was implemented in April this year) and they will be affected by the gradual removal of tax relief on mortgage interest from April 2017.

You can read Sarah Davidson’s take on this, and much more in HomeLet’s ebook .

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