Are you a Buy to Let Mortgage Prisoner?

[The Mortgage Broker]

Many landlords are saddled with lenders on less than competitive interest rates, or stuck on higher standard variable rates making them virtual mortgage prisoners, according to The Mortgage Broker Ltd, a nationwide broker providing mortgages to buy-to-let landlords and investors.

Landlords may feel imprisoned by the new ‘affordability’ testing, which is being undertaken by lenders. As a result, some landlords are suffering expensive mortgage rates, which are eating into their profits each month, or even forcing them into a loss. The new lending rules means some lenders will have to take into account a landlord's other expenses such as their tax status. It will be on this stricter lending that landlords will be assessed to see if they can afford to borrow.

According to Darren Pescod, Managing Director of The Mortgage Broker Ltd, often landlords do not fit this new lending criteria. He comments: “Britain's two million landlords are facing assaults from both the taxman and the Bank of England. The mortgage restrictions are very bad for landlords and pose a major threat to BTL investments. If landlord mortgages are tougher to secure, buy-to-let landlords could find themselves stuck on expensive rates indefinitely.

“Thankfully, there are lenders with new buy–to-let products, specifically aimed at buy-to-let prisoners or ‘misfits’. The good news is that the lender will only assess rental income at 125% of the mortgage pay rate.

“This new move will increase the options available to landlords looking to remortgage, where they may be restricted by the FCA rules for calculating mortgages for buy-to-let landlords.”

 

[diyhelp]

Hi, I wonder if you could answer a question I have been thinking about for a long time.

Why is the UK government making it so difficult and expensive for BTL investors when there is a serious shortage of rental properties right across the UK. I appreciate the need to ensure financial markets are stable and secure but surely they should be encouraging BTL investors to help with the shortage? Do you think increased taxes and tighter lending criteria are politically motivated?

 

[The Mortgage Broker]

Hi, I wonder if you could answer a question I have been thinking about for a long time.

Why is the UK government making it so difficult and expensive for BTL investors when there is a serious shortage of rental properties right across the UK. I appreciate the need to ensure financial markets are stable and secure but surely they should be encouraging BTL investors to help with the shortage? Do you think increased taxes and tighter lending criteria are politically motivated?

Hi,
I believe the government are hitting landlords hard for a few reasons, the obvious one being the increase in taxes but in their bigger picture view it is to decrease the amount of landlords which will free up property and make it more affordable for first time buyers. The change in lending criteria is not politically motivated to the same extent or for the same reasons - This has changed with a view of more responsible lending and trying to avoid mistakes of the past.

 

[diyhelp]

Thanks for clearing that up - I had never thought about the government decreasing the amount of landlords to make it more affordable for first time buyers. I suppose the fewer potential buyers the less upwards pricing pressure.