New rules for portfolio landlords
— 30 Jan 2019 17:17:30
The Prudential Regulation Authority - part of the Bank of England - are enforcing tougher standards to prevent high risk lending to portfolio landlords.
The definition of a “portfolio landlord” is someone with four or more mortgaged properties. Properties held in a landlord’s name as well as those owned through a limited company are affected by the new regulations, which were introduced in October 2018.
Lenders must now conduct a full analysis of a landlord’s portfolio to decide whether they are a suitable candidate for a buy-to-let loan. To date, this has resulted in longer application times and more paperwork.
A landlord may now be asked to submit:
- Proof of ownership of all properties
- Mortgage details
- Tenancy agreements
- Proof of rental income - bank statements
- Evidence of other income - tax returns or company accounts
- Business plan
- Income v/s expenditure spreadsheet
- Cashflow forecast
The idea is that lenders no longer look at a mortgage in isolation but consider it in the context of an entire rental business. In so doing, they can decide what information to request from the above list.
There are fears that the new standards enforced by the PRA will result in more declines and re-applications. Yet any normal business wanting a loan would expect to submit this kind of information, so should landlords be treated any differently?