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.

Enness Private

We arrange large mortgages secured against international property for global individuals.

You May Also Enjoy

Who are Rentd
Letting Agent Talk

Renters (Reform) Bill Dropped – Thoughts from the Industry

The Renters (Reform) Bill has been dropped as a result of the general election being called. Here are some thoughts from within the property industry. Ben Beadle, Chief Executive of the National Residential Landlords Association: “It is hugely disappointing that this Bill will not now make it into law. The news comes despite the fact that…
Read More
Estate Agent Talk

July 4 General Election – Thoughts from the Industry

Prime Minister, Rishi Sunak has called a general election for July 4, 2024, citing now being the time for the people of Britain to choose the next government. Here are some thoughts from within the property industry. Tim Bannister, Rightmove’s property expert: “A look back at recent elections shows that house prices and activity usually…
Read More
Rightmove logo
Breaking News

Rightmove’s weekly mortgage tracker

Matt Smith, Rightmove’s mortgage expert said: “Today’s inflation drop feels like an important milestone on the road to the first Base Rate cut. There’s been some to-ing and fro-ing over whether we’ll see a summer Base Rate cut, but today’s news will likely reinforce some of the positive words coming from the Bank of England…
Read More
Estate Agent Talk

Rayner right to be ambitious on housebuilding

At UKREiiF, Angela Rayner, Shadow Housing Secretary made several commitments to help solve the UK’s housing crisis including new towns, greater numbers of affordable housing, a return of housing targets and a clear design code criteria. Richard Beresford, Chief Executive of the National Federation of Builders (NFB), said: “Although election season is the time for…
Read More
Breaking News

Comment on Land Registry’s House Price Index showing an annual rise of 1.8%

Commenting on Land Registry’s UK House Price Index showing an annual rise of 1.8%, Daniel Austin, CEO and co-founder at ASK Partners, said: “The property sector is recovering. Rent values have seen sustained growth, positioning real estate as reasonably valued in comparison to gilts and presenting growth potential. In the realm of commercial real estate,…
Read More
Breaking News

Breaking Property News – 22/05/24

Daily bite-sized proptech and property news in partnership with Proptech-X.   Sunak calls General election for 4th July 2024 – American Independece Day Many pundits feel that post the General election Rishi Sunak will fly off to Silicon Valley, so maybe holding the General election on American Independence Day is no coincidence! The real carnage…
Read More