Is buy to let lending getting tougher?

Posted on Friday, April 22, 2016

After the introduction of new buy to let tax rules, the Bank of England’s tightening up of mortgage lending criteria may also impact on existing and potential new landlords.

Over the last 12 months, landlords have faced a flood of new rules and regulations and the latest initiative means there will be tougher lending criteria applied to all landlords that are looking to purchase a buy to let property.

The Bank of England hopes that the stricter lending criteria will reduce the amount of buy to let lending by 10% to 20% in three years’ time. Until now, landlords have typically required a 25% deposit to get a buy to let mortgage, as well as rent to cover their monthly mortgage payments by 125%.

The Prudential Regulation Authority - which is the Bank of England’s arm that regulates the financial sector - wants lenders to make more stringent income checks on landlords, to ensure they can afford the mortgages on their rental properties. It also wants banks to test whether landlords can still afford the monthly payments on these loans if interest rates rise.

 

Back to News Articles