New affordability rules come into force today for landlords with four or more properties – but which lenders are coming down hardest?
As the Bank of England’s Prudential Regulation Authority begins to enforce stricter stress testing for portfolio landlords, lenders are revealing how they’ll deal with the new regulations – and at this stage it’s a mixed bag.
While some banks are bringing in new systems to deal with more complicated underwriting processes, others are dropping out of the buy-to-let market entirely.
Which? explains how the new rules could affect you, and which lenders remain open for business to portfolio landlords.
Tighter restrictions on portfolio borrowing
It’s important to point out that the changes only affect people defined as portfolio landlords – those with four or more mortgaged buy-to-let properties.
From today, lenders will need to assess the financial viability of every property in a landlord’s portfolio when deciding whether to offer them a further loan.
Previously, landlords could provide information about their overall accounts. Now, they will need to show mortgage details, cash flow projections and business models for every property they own when applying for a new loan.
Affordability will also be more tightly tested. When landlords apply for new borrowing or to remortgage their current properties, their monthly rental income will now need to cover 125% of their mortgage payments, stress tested at an interest rate of 5.5%.