New Buy-to-Let lending rules

The Prudential Regulation Authority (PRA) are introducing the new lending rules which could make it more difficult to get a buy-to-let loan from January 2017.

The lenders will have to carry out the affordability assessments that will take into account:
· Landlord’s costs including tax liabilities,
· verified personal income and
· possible future interest rate increases.

This means that the Landlords will be subject to a ‘stress test’ which requires them to prove that if the loan interest increases, they will be capable to continue to pay their monthly instalments.
When setting the expectations for future interest rate increases, the PRA reviewed the prevailing standards in the industry and considered the impact of changes in interest rates, and calibrated the stressed rate accordingly.
There is also a warning for the “portfolio landlords” (defined by the PRA as being those with four or more mortgaged buy-to-let properties) as they should be assessed using a specialist underwriting process.

According to PainSmith solicitors “The new rules may not have a substantial effect as many lenders will already be complying with them. However, some more marginal lenders may tighten their requirements and landlords seeking to borrow against groups of properties may find lending criteria harder to meet. The new rules are to be phased in and so careful consideration should be given from the start of 2017. The new rules will also apply to re-mortgages and so lending obtained under old criteria may be difficult to re-finance”.

If you wish to receive a professional tax advice or a free initial consultation, feel free to contact Paul at Passman Leonard.