Stricter lending criteria for BTL mortgages

August 26, 2015

High street lenders are getting tougher with landlords applying for mortgages  to purchase a buy-to-let property, it has been announced in various publications that lenders are looking to introduce stricter criteria when it comes to checking applications, higher interest rates could also be applied to these mortgages.

It has been mentioned that Landlords will face tougher questioning about their private financial situation.  The stricter rules will  mean Landlords will be asked about their experience reagarding buy-to-let, they will be asked about the deposit and how it was sourced and  they must also prove that they are not wholly reliant on their rental income and to show they will also be able to cope with void periods and any repairs to the property. According to a recent report in the Daily Mail many of the major banks  are reported to be looking at or have already implemented the way they assess mortgage applications from potential buy-to-let landlords.

Stricter lending criteria for ordinary mortgages to homeowners has already been implemented, it came into force following the  Mortgage Market Review in April last year, buy-to-let mortgages are  not regulated by the FCA so were not affected by the review, experts expect this to change in the near future. Landlords have been enjoying very low rates over the last few years and as such more and  more buy-to-let borrowers have been attracted to buy-to-let as a way of supplementing income, especially the older savers who were poorly rewarded by their ordinary savings account.

The buy-to-let has put pressure on the availabilty and affordability of housing to the ordinary buyer, especially first time buyers who have probably been affected the most, buy-to-let is being blamed for the increase in property prices presently being experienced in many parts of the country.

There are concerns, that if lenders tighten up their affordability criteria and increase their rates then we will see less people aspiring to become landlords, and the affect of that will be less rentable property on the market which is exactly what the country does not need right now.

Alex Evans

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