The anticipated second part of the PRA (part of Bank of England) changes are now with us and all lenders will be implementing this from 30th September. As a reminder, the PRA recommended various changes to lenders in two stages.
The first part in January was tougher affordability as the lenders had to assess an applicant’s tax liabilities when deciding how much to lend. This increased the rental cover rate for assessing buy to let mortgages from 125% on a 5% rate to 145% cover at 5.5%. There were two exceptions 5-year fixes and borrowing within a limited company.
The second part was for each lender to have a separate policy for portfolio landlords and we have been eagerly awaiting the lenders interpretation of the guidelines as they were quite vague.
A portfolio landlord is anyone who owns personally or within a limited company four or more mortgaged properties (excluding your main residence). Historically, a lot of lenders just looked at the property they were being asked to lend on. Now it’s the whole portfolio they must assess.
Many lenders are already set up to do this, but others are behind or don’t want to be in this market. If you have obtained finance from the high street or a challenger bank then a lot of this information will already have been provided, so there won’t be too much additional work for you.