Here is Property Options’ latest update on the UK Buy To Let (BTL) market – for April 2018.
This update is by economist Chris Worthington, who is one of our regular PIM speakers.
The Buy to Let Mortgage Market
Lending Criteria
In September 2017 the Prudential Regulation Authority (PRA) of the Bank of England introduced more stringent tests for buy to let (BTL) mortgages.
Lenders are required to check if that an applicant can still afford their mortgage if interest rates rise to 5.5% and most lenders now require the rent to cover at least 145% of the mortgage interest. In effect this means that BTL investors will need to find higher deposits.
However the situation for “portfolio” landlords, defined by the PRA as landlords with four or more mortgages, is more challenging.
The PRA have introduced new standards for portfolio landlords that require lenders to obtain more financial information from borrowers. A recent report from market research company BDRC Continental found 48% of landlords expect that the above changes will slow down the process of securing a mortgage.
Interest Rates
In November the Monetary Policy Committee (MPC) of the Bank of England raised the Bank Rate to 0.5%, the first increase in a decade. The MPC reasoned that “ongoing tightening” was necessary to return inflation to the target of 2%.
At the last meeting of the Bank of England Monetary Policy Committee it was decided not to increase the Bank Rate any higher than the current rate of 0.5% – but the Governor of the Bank of England, Mark Carney, warned that more rapid increases in the Bank Rate are likely in future raising the possibility of an increase in interest rates in May.
Mark Lofthouse, CEO of mortgage technology company Mortgage Brain commented:
“The PRA changes coupled with what could be seen as the start of a number of interest rate rises is starting to affect the cost of mainstream BTL mortgages.
However 721 new BTL mortgage products were introduced in the UK in 2017 and there are still pockets of cost reductions and savings to be had for landlords and property investors.”
Re – mortgaging continues to drive a large share of the BTL mortgage market, taking around 52% of market share with a preference for fixed rate products.
John Heron, Managing Director of Mortgages at Paragon commented:
“The results of our latest intermediary research highlights the overwhelming preference that the market has for longer term fixed rate products.
Much of this is driven by the understandable requirement that landlords have for payment stability into the future against an uncertain economic backdrop.”
How should BTL investors respond to the changes in the mortgage market?
Mortgage offers are typically valid for six months, see your mortgage broker and start early!
Find Out More
We will all be discussing the latest position on the property market, both in Bristol and across the UK, at our next PIM on Thursday 26 April 2018 at Future Inn, Bristol City Centre, 6-9 pm.
We hope you will join us then.
For more info and to reserve your place Click Below
Property Options Bristol
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