Many landlords are stuck with lenders on less than competitive interest rates, or trapped on higher standard variable rates, making them virtual ‘mortgage prisoners’, according to The Mortgage Broker Ltd.
The firm is warning that landlords may feel like mortgage prisoners due to new affordability testing, which is being undertaken by lenders. As a result, some landlords are suffering expensive mortgage rates, which are eating into their profits each month, or even forcing them into a loss.
The new lending rules mean that some lenders will also have to take into account a landlord’s other expenses, such as their tax status. As such, landlords must be aware of the new mortgage interest tax relief changes coming into force from 6th April 2017.
It will be on these stricter lending criteria that landlords will be assessed to see if they can afford to borrow.
Darren Pescod, managing director at The Mortgage Broker, believes that many landlords do not fit the new standards. He explains: “Britain’s 2m landlords are facing assaults from both the taxman and the Bank of England. The mortgage restrictions are very bad for landlords and pose a major threat to buy-to-let investments. If landlord mortgages are tougher to secure, buy-to-let landlords could find themselves stuck on expensive rates indefinitely.”