Tougher Rules for Buy-to-let Landlords
Buy-to-let landlords could soon find it much harder to secure finance helping them to acquire a property. This follows news of tougher regulations for buy-to-let mortgage lenders when calculating mortgages for those investing in the Private Rented Sector (PRS).
The Financial Conduct Authority (FCA) are concerned that lending standard in the sector may not be up to scratch, and is not helped by the fact Buy-to-let lenders are not regulated by the PRA which is responsible for the prudential regulation and supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms.
The City Watchdog is now looking into plans of how they can tighten the regulation around Buy-to-let mortgage lending, having already written to companies to inform them of their concerns with the ever growing PRS.
Philip Salter, FCA director of retail Lending, has written a letter that details his concerns that Buy to Let lenders are gaining a reputation for below par standards of underwriting. The letter that has been issued to affected companies, details how The FCA plans to review the lending procedures in place for the PRS, including “considering to what extent poor Buy-to-let underwriting by firms solo-regulated by the FCA might compromise the advancement of our objectives – in particular our objective to protect and enhance the integrity of the UK financial system, as well as the potential for poor Buy-to-let lending to affect the fair treatment of customers with regulated products”
With the recent reduction in interest rates to 0.25%, there is now further concern that lenders could be stoking the fires of a repayment crisis when interest rates do, inevitably, rise again.
Earlier this year, the banking regulator PRA published a paper outlining new plans for tests of affordability for borrowers, including a minimum ‘stressed” interest rate of at least 5.5%.
So what happens if you make it through all the new regulations, secure yourself a great investment property and end up with a tenant who doesn’t measure up? Clearly, with yields falling and capital values not falling sufficiently to create a value cushion, it is unlikely that many landlords will be able to endure either void periods or a period of time where the rent is in arrears.
At SLC Solicitors, we can protect your assets with effective procedures to recover rent arrears and ensure the tenant is evicted should this be your final goal. Our aim is to provide additional income streams through rapid recovery of ground rent debt and admin charges ensuring your investment has the opportunity to develop.
For more information on how SLC Solicitors can maximise your income streams, contact Jo Green today.