The Council of Mortgage Lenders (CML), has warned the Prudential Regulation Authority (part of the Bank of England) to beware of imposing too many restrictions on buy-to-let lending.
Buy-to-Let mortgage applications have already been subject to increasing scrutiny says CML where mortgage firms have progressively tightened their lending criteria.
The Bank of England’s has recently been “stress testing” buy-to-let lending through a variety of measures including the introduction of a 3% stamp duty surcharge on second properties and taxation changes limiting mortgage interest relief. Following the outcome of the Brexit vote, it is uncertain whether the Bank will adjust its plans.
The CML commented:
“As the industry continues to respond to these headwinds, we believe there is a risk that the PRA’s proposals could magnify the effects on the buy-to-let sector. It is possible that the cumulative impact of intervention targeted at the buy-to-let sector could affect its strength and sustainability.
“Levels of buy-to-let arrears are currently little more than a quarter of those in the residential mortgage sector – which are themselves near an historic low point. And even though lenders do not extend the same levels of forbearance to landlords as they do to residential borrowers, fewer than one buy-to-let property in 2,500 is taken into possession.
One pertinent point highlighted in the CML’s submission to the PRA is that lenders should be able to take into account future increases in rent when assessing the future affordability of borrowers. “If lenders are expected to build into their calculations the effects of higher interest rates on the costs of running their businesses, it is also reasonable that they should be able to anticipate higher rental income. In many cases, rent increases are already written into the contract between landlord and tenant,” says the CML.
Article courtesy of LandlordZONE®
