Mortgage Intelligence update: Landlords prepare for September’s PRA changes

Nathan Reilly discusses the upcoming changes in the buy to let market and how advisers can help landlords prepare for them.

The buy to let sector has seen a number of changes in recent years. This has been a challenge for landlords, lenders and advisers alike during a period of adaptability, flexibility and resilience.

But with the Prudential Regulation Authority’s (PRA) second phase of new underwriting standards for buy to let lending coming into effect on 30th September, there is further in store for the sector. Some lenders are already making announcements regarding their approach to buy to let portfolio lending, which means landlords need to prepare now.

What exactly is changing?

In line with guidance set out by the PRA, from 30th September 2017 landlords who have four or more mortgaged buy to let rental properties will be considered as portfolio landlords by lenders. The PRA expects all firms that conduct lending to portfolio landlords to use a specialist underwriting process that takes into account complex borrowing scenarios.

This will require the entire portfolio to be underwritten when applying for a new buy to let mortgage, even if the other mortgages are with a different lender. Lenders will also be required to use additional affordability tests on portfolio landlords and will require additional documentation to support applications.

How can landlords get ready?

Specialist lenders, already experienced in using a similar underwriting approach, have been clarifying their stance and assessment criteria. Whilst a number of mainstream buy to let lenders have also started to confirm whether they will be supporting portfolio buy to let lending going forward.

It’s likely there will be more announcements over the coming weeks, but between now and 30th September, it’s vitally important landlord clients are aware of how the changes could impact their current or future plans.

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