New rules for buy to let rental stress testing
You may, or may not, be aware that the Prudential Regulation Authority (PRA) has been considering changes to buy to let rental stress testing recently, affecting buy to let mortgages across the UK.
Responsible for the prudential regulation and supervision of lenders, the PRA have now proposed that banks should be operating a standard stress for every case, which could be a minimum of 5.5% at 125%, or perhaps even higher.
This is yet to be set in stone, however could prove unfortunate for some landlords and properties in London, as the average rental yield currently stands at 3-4%. This means clients with either a 70% or 75% loan to value (LTV) property are likely to struggle more when it comes to remortgaging.
If landlords wish to release equity in order to further fund buy to let properties, they will have to do so quickly or risk fending for themselves later on. The market has consequently witnessed increased levels of remortgages across London, especially from those with buy to let portfolios.
Remortgaging to release equity is one of the best moves you can make in the current climate and something we can help you with. Many lenders have equally been offering enhanced service in this space as a result.
Precise Mortgages, a lender we have an excellent relationship with, is currently offering ‘pay rate’ deals on lifetime trackers and 5 or 10 year fixed products, now starting from 3.67%. This means the stress test becomes 3.67% at 125%, providing much greater scope for releasing maximum equity – as long as the client has a track record of at least 1 or more buy to lets.
Equally, Kent Reliance is offering a 2 year discounted variable rate aimed exclusively at limited company buy to lets. Available up to 65% LTV with no early repayment charges (ERCs), Kent Reliance is currently using a rental calculation of 3.59% at 125% for this product, compared to many lenders previously raised rental calculation of 5.5% at 125%.
The buy to let space has certainly proved the chameleon of the mortgage market, witnessing more changes than most. However, there are still many beneficial deals available when sourced in the right way.
With many using uncertainty in the market as a reason to hold-off on taking any action with their mortgage, we would wholly recommend remortgaging now and reaping the benefits of a more beneficial rate – especially with these potential buy to let changes pending.
If you have any questions on this article, or the buy to let market in general, please do not hesitate to contact us. Our experts are on hand anytime to assist you.
Blog from Enness Private: Blog in full here.
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