Portfolio Landlords Buy to Let Mortgage Assessments

I received some interesting comments from the residential estate agent, Portico, this week on the new buy-to-let mortgage lending rules hitting portfolio landlords (those with four or more buy to let mortgage loans) later this month.
Portico.com’s Regional Director, Mark Lawrinson, commented:

“Under the new rules, if you want to make an application for a buy-to-let-mortgage on a new rental property, the lender will have to look at your entire property portfolio when they decide what mortgage deal they can offer on a single property. For example, if you have six properties and four are generating enough rental income to cover mortgage payments and then some, but the other two are not, your new mortgage application may not be approved by some lenders.”

The fact is that as of 30th September, lenders will also require for portfolio landlords, a full breakdown of rental properties, a business plan, and cash flow projection to support a new application. Oh dear.  And all so unnecessary.
As a result of the new buy-to-let lending changes, we may see a surge of rental stock come back on the market for sale as landlords look to offload their weakest performing properties in order to get further lending on more potentially profitable properties.
When asked by Portico, seasoned landlord and London NLA representative, (and an old friend of ours),  Richard Blanco said:

 “Landlords who want to remortgage or capital raise before being assessed through the new criteria will need to get their skates on. They may be too late for some lenders who are applying the new rules from Friday 1st September. Many lenders will unfairly assess landlords’ existing mortgages through a 145% x 5.5% prism even though they originally got their mortgages on looser criteria years ago. This could create mortgage prisoners: borrowers who are unable to switch lenders.”

This is another good reminder, (as if you needed another one!), that if you do remortgage to another lender, you should always choose one that has a good track record in switching customers to competitive follow on rates once the initial product has expired.
Landlords are gradually waking up to the fact that they are having to borrow at a much lower loan to value, so they may not get further advances because rental coverage has to be much higher. If their regular lender has decided not to do business with ‘portfolio landlords’, they may need to take their business elsewhere.
 It could be that a some lenders withdraw from buy to let as a result of the new rules. Apparently, Santander have already indicated they will not lend to portfolio landlords for purchases or additional borrowing.
Of course these new lending changes come on top of the tighter stress tests which came into place in January this year.
Portico’s Lawrinson says:

“Rental yields in London are  lower than elsewhere in the UK, so tougher affordability checks mean that a lot of properties simply won’t cut it as viable buy-to-let investments. We have certainly seen less professional landlords adding to their portfolio this year, but there is still money to be made in buy-to-let if you invest smartly.”

I agree. You simply need to be smarter than the “dabbling landlords” and keep plenty of overhead room on your mortgage loans. Of course, it’s all to meet new daft PRA lending criteria, but as we have said before, the PRA has not put up any evidence that portfolio landlords are particularly financially stretched. 

http://www.lettingfocus.com/blogs/2017/09/portfolio-landlords-buy-to-let-mortgage-assessments/