On the 29th September 2016, the biggest game changer in buy-to-let finance was published by the Prudential Regulation Authority (PRA), which is part of the Bank of England. The PRA have directly intervened with the lenders to implement policies that will affect every landlord and investor who has or needs a BTL mortgage in their personal name.
However it's not all doom and gloom and as landlords it's just another obstacle which we will get over. Some people though will need to adapt and deposits may have to increase in lower yielding areas.
This change has been implemented as the PRA were concerned about the growth plans of the lenders and the affect that this could have on the UK housing market. If you want to read it in full, search for Policy Statement PS28/16 or contact me for a copy.
What's it all about?
1. Affordability - Lenders need to consider the changes to personal mortgage interest relief. Historically lenders have used a 125% rental calculation for Interest cover. 100% for the mortgage rate and 25% to cover voids, management, repairs and expenses. This has now risen to 145% for all personal applications due to the 20% tax charge first announced by George Osborne in summer 2015.