The National Landlords Association has urged landlords to consider remortgaging soon, ahead of tougher buy-to-let regulations coming into force next month.
Landlords should consider taking advantage of record-low interest rates soon, particularly those looking to change provider, as lending criteria is about to get much tougher.
Tougher Lending Criteria
On the 30th September, the second phase of the Bank of England’s Prudential Regulation Authority ‘s underwriting standards are due to be implemented. As such, the NLA is calling on landlords to remortgage right away.
This call comes as the proportion of buy-to-let remortgage transactions as a share of the overall lending market has increased over the last few months. This is due to more landlords looking to limit their exposure to the new buy-to-let tax regime.
As demand for buy-to-let loans is falling, more lenders have made substantial cuts to their rates, with landlords able to take advantage of reduced rates.
The most recent quarterly research from the National Landlord Association suggests that landlords are already finding it harder to arrange their mortgages. 43% of those questioned said that obtaining finance has become more difficult since the start of the year.
In addition, 53% of landlords said they have to provide additional evidence in order to support recent mortgage applications – including tax returns and cash flow forecasts.
Chris Norris, head of policy at the NLA, observed: ‘Since the PRA regulations were introduced in January, the marketplace is looking considerably more complex. It was always likely that lenders would start to demand more evidence from applicants, and landlords are already feeling they have to go further to prove that they can afford finance.’
‘Changes to buy-to-let taxation will eat away at many landlords’ profits and make it more challenging for them to manage their businesses. As a result, many are looking to limit their exposure to the changes, which is why we’ve seen a rise in re-mortgaging.’
Concluding. Norris said: ‘However, the situation is due to worsen from September and while it may not be financially advantageous for everyone, if you’re considering re-mortgaging or expanding your portfolio then do so now to avoid any further difficulties.’