Portfolio landlords face another financial upset as the Bank of England tightens up the rules for buy to let mortgage lending.
The Bank has already forced a shake-up of mortgage affordability rules in recent weeks as banks and building societies have been forced to apply tougher rent cover restrictions.
Many now demand rents should cover 145% of mortgage interest payments instead of the former 125%.
Now, lenders have revealed the Bank also wants them to crackdown even more on buy to let mortgage affordability from September 2017.
This time, portfolio borrowers will not only have to show the property they are borrowing against meets rent cover rules, but that the rules also apply to any other mortgaged letting properties they own as well.
Mortgage experts fear many lenders will pull out of portfolio lending because of the extra paperwork burden.
Most portfolio lenders have an average of 10 letting properties and lenders must see proof that any of them that are mortgaged do not break loan to value limits imposed by rent cover rules.
Ray Boulger, of mortgage broker John Charcol, said:
“Many lenders will find the significantly enhanced underwriting process uneconomic.
“Although these new rules don’t come into force until this time next year, most lenders are likely to introduce them before that date. That is likely to result in many lenders withdrawing from the market.”
The rules are designed to make lending less of a risk should house prices fall.
Buy to let lenders are believed to be looking at restricting portfolio lending by limiting the number of properties a landlord can mortgage or by capping the total amount of borrowing.
Figures discussed are lending caps of between £1 million and £2 million, which limits portfolio size to four average priced homes.
Continued attacks on entrupeneaurs will end in tears as it did with punitive taxes in the 1970s
The people who drive our economy forward to just move to somewhere better to do business
You cannot crush people spirit and not expect to pay the consequences
There is, supposedly, a great shortage of property to buy hence the frequent panic measures to stimulate house building by successive governments. It seems to me that one way the government is trying to increase the availability of housing is to make things difficult for private landlords (rafts of regulation such tax changes, licensing etc. etc.) and hence ‘nudge’ us to sell up. A cunning plan, but one that will have the unintended consequences of pushing up rents and increasing homelessness.