From the 30th September 2017 there will be further changes brought into place for the buy to let market, and how lending institutions review funding applications from professional investors and landlords.
At the beginning of 2017, banks embedded the first of the PRA’s ‘changes to underwriting standards’ which were designed to bring consistency to lending. Specifically with regards to the minimum affordability requirements and what stress testing should be applied for the different clients paying varying levels of tax within a transaction. This was put into place to protect the investor community by ensuring they were only provided with sensible levels of debt that would be open to future refinancing.
The new standards taking place from 30th September this year asks lenders to ensure they have a great understanding of the customer, and most importantly their position within their investment portfolio. The PRA considers that borrowers with four or more mortgaged buy to let properties either together or separately should be treated as ‘portfolio landlords’. From the 1st October 2017, customers will be classified into two brackets;
1-3 Mortgaged Properties; This relates to any property/properties owned and mortgaged for all customers, and also includes the property intended for purchase/refinance at that time.
4 or more Mortgaged Properties (Portfolio Landlords); Where a customer is looking to buy or refinance their 4th mortgaged investment property, they will now be classed as a ‘Portfolio Landlord’.
Here at Key Commercial Finance we are aware of the impact this will have on the market as a whole, and the responsibility lenders will have to support this transition. The lending community must communicate how this change applies to their offering, and also how they plan to support their existing and prospective customers. Please call Key Commercial Finance today and speak to one of our friendly team for more information.