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The past year has seen huge change within the buy to let sector and the overhaul has presented challenges for all concerned including lenders, brokers, clients and not forgetting tenants, since many have seen an increase in their monthly rent.
In January the buy to let lenders that are regulated by the PRA had to apply restrictions on lending criteria; this translated to stricter affordability testing on the rental. These tests were designed to include the effect of the tax changes which began implementation from April and a stress test on future interest rate rises. These changes have of course had an impact on the maximum amount a client can borrow and has seen clients using limited company (SPV) structures and longer term fixed rates to achieve required borrowing levels.
The next major change came about in September; this second phase of regulation was the introduction of new underwriting standards. In line with guidance set out by the PRA, landlords with 4 or more mortgaged buy to let properties, or those purchasing a fourth would be considered as a portfolio landlord. Where the lender is underwriting an application for a portfolio landlord, the entire portfolio must be underwritten with additional affordability tests being applied. There is also a requirement for additional documentation such as business plans, portfolio and cash flow statements. The level of documentation required does of course differ across lenders.
As a result of the PRA changes in 2017 a number of lenders have changed their buy to let offering, with many not currently assisting portfolio landlords or lending to limited company (SPV) structures.
Even though the regulatory and underwriting changes have had a huge impact on the buy to let market, Brightstar have seen an uplift in the number of transactions for the sector. I believe this is a direct result of splitting our residential and buy to let mortgage division into two separate teams; it has allowed us to provide an expert approach to support our brokers through the complexities of buy to let mortgages.
Explore the scenarios where our team of experts can help your buy-to-let client here
Tell us about your client scenarios: 01277 508 954
Or email: helpdesk@brightstarhub.co.uk
