Buy-to-let investors face higher costs
BUY-TO-LET investors face having to inject much more cash into their properties due to changes to the market.
The Bank of England has set out plans to tighten rules around buyto-let lending. Last week, the Bank’s Prudential Regulation Authority (PRA) outlined minimum expectations that firms should meet in underwriting buyto-let mortgages, saying affordability assessments should take into account borrowers’ costs including tax liabilities and possible future interest rate increases. The PRA said changes should start coming into force from January 1.
The PRA said its actions “are intended to bring all lenders up to prevailing market standards”.
Buy-to-let investors have already faced a three percentage point hike in stamp duty rates when buying properties, which came into force on April 1.
Richard Donnell, insight director at Hometrack, predicted some investors may find they need to inject a further 10% of the property price into their investment.
But Paul Smee, director general of the Council of Mortgage Lenders, said the new requirements broadly reflect existing practice.