Buy-to-let landlords could soon find it harder to secure finance to acquire property following the news that buy-to-let mortgage lenders may face more stringent regulations when calculating mortgages for those investing in the private rented sector (PRS).
Given that buy-to-let lenders are not supervised by the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA) is growing increasingly concerned that lending standards in the sector may not be up to scratch and may ‘compromise’ the integrity of Britain’s financial system.
The City watchdog is now drawing up plans to tighten its scrutiny of buy-to-let mortgage lending and has already written to companies for which it has sole regulatory responsibility to inform them that it is considering intervening in the growing PRS.
According to a letter sent to affected firms by Philip Salter, the FCA's director of retail lending, which was obtained by Sky News, the city watchdog’s review of the buy-to-let lending sector would include “considering to what extent poor BTL underwriting by firms solo-regulated by the FCA might compromise the advancement of our objectives - in particular our objective to protect and enhance the integrity of the UK financial system, as well as the potential for poor BTL lending to affect the fair treatment of customers with regulated products”.
Earlier this year, the PRA, the banking regulator, published a consultation paper outlining plans for new affordability tests for borrowers, including a minimum ‘stressed’ interest rate of at least 5.5%.
The Bank of England estimates that banks are likely to extend their lending in the UK buy-to-let mortgage market, which is currently worth around £200bn annually, by about 20% a year over the next two years.
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What world are these bankers living in? After 2021 any PRS landlords with any sort of mortgage is likely to be well on the way to bankruptcy unless the government decide to repeal the pernicious and totally unreasonable Section 24 of the Finance Act 2015/16 which will mean paying tax on income which doesn't exist. Anyone purchasing a property to rent with a mortgage currently must be mad, as this, coupled with the 3% excess stamp duty means that within a few years their business will be unviable. When are landlords and agents going to wake up to the fact that unless this act is repealed, we will all be out of business in 6 years? Currently, this only applies to personally owned properties, but how long will it be before this cash-starved government extends the same unreasonable regulation to Ltd companies who invest in property?
I see Landlord Mortgages are just about to launch Lend2Landlord that will seek out funders that are no subject to such rules.
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