With so many changes in the Buy to Let market, what are the main factors?
New Bank of England PRA proposals
This document aims to tighten existing rules and legislation on Buy to Let mortgages. It scrutinises affordability and interest rate stress testing, although the consensus is that these aspects will have limited impact. Its biggest impact will be on landlords with a portfolio of four or more properties, who may have to undergo fully documented specialist underwriting.1
Using a specialist lender could be an attractive option, if these new changes to underwriting for portfolios come into play, as they will be able to take a more bespoke approach to each case.
Reduced tax relief and Increased Stamp Duty
With the stamp duty increase coming into force in April the market came a frenzy of transaction activity ahead of the deadline, which has now dropped off considerably.2
However, even though the deadline has passed there is still the opportunity to make the most out of your investment by buying property through a Limited company or SPVs (Special Purpose Vehicle). These options while beneficial require a little more thought so it is recommended to seek specialist advice.
Changes to lending criteria
The MCD (Mortgage Credit Directive), as we have outlined previously, introduced a tranche of changes to the affordability criteria for new Buy to Let mortgages. It will impact Consumer Buy to Let mortgages in particular as affordability checks become more stringent3. Many have taken out bridging loans or bought in cash in order to make purchases in time, leaving them now looking for a mortgage.
Again, getting advice from a mortgage specialist could be highly beneficial in helping you avoid the affordability check pitfalls and find a lender best suited to you. It will also allow you access to lenders who are willing to consider remortgages for the properties where bridging loans and cash were used for the purchase on an individual basis.
And of course Brexit…
There are very few aspects of life in Britain that will not be impacted by the impending referendum, not least the mortgage market. Many market commentators are predicting a fall in property transactions4. But although there is uncertainty, there may also be opportunity for some as prices may fall reducing barriers to entry for new buyers5.
So what should Buy to Let investors be taking away from this? Taking advice and finding a mortgage solution tailored to you could be the difference between investing successfully and falling into the pitfalls of the changing Buy to Let market.
We are the first mortgage broker in the UK to specialise in arranging larger or more complex mortgages, and our average loan size is more than £1million. There are few situations our team of brokers are yet to come across.
If you would like to discuss any of the changes in Buy to Let legislation listed above, or a mortgage you are looking to arrange, with one of our Mortgage Managers, call us on 020 7519 4985 or send us an email.
1http://www.itv.com/news/2016-03-29/what-are-the-proposed-new-rules-for-b…
2http://www.theguardian.com/money/2016/apr/21/rush-to-beat-stamp-duty-cha…
3http://www.ftadviser.com/2016/02/19/mortgages/mortgage-credit-directive-…
4http://www.cityam.com/240640/halifax-house-price-index-shows-dip-in-mont…
5http://www.theguardian.com/money/2016/may/09/house-prices-fall-stamp-dut…
