Portfolio landlord mortgage: PRA sets out changes

According to a recent report, landlords contribute £26.1billion to the UK economy, and create thousands of jobs – including letting agents and property managers. Yet, year after year, we see the implementation of policies deterring them from the market, with more planned. In September, the Prudential Regulation Authority (PRA) is set to reassess what they consider to be a portfolio landlord. Landlords with more than four mortgaged buy to let properties will experience a change in the way a portfolio landlord mortgage is underwritten. This is simply down to the fact portfolio landlords have a much larger amount of debt in aggregate.

How will the changes impact lenders?

It’s not only landlords who will be impacted; increased training and changes to systems – because systems would need to be reconsidered – will come at a huge cost to lenders. It may even result in a reduction of the number of lenders who offer this type of mortgage, as September may not be a feasible deadline for implementation.

Lenders will have to be trained in a new way of doing things; they will have to underwrite portfolio landlord mortgages, taking many more factors into consideration. These include their experience in the market, any other assets or liabilities, cash flow history and forecast and how the lending sits within their existing borrowing. This is likely to add to the length of time it takes for a portfolio landlord’s mortgage offer to come through.

We know there are lenders who are already preparing for these changes and aiming to support the market from day one – but, each lender is different so it’s impossible to say how each will prepare. Or even if they are going to be prepared.

How will the market change for landlords? 

We already believe landlords will be deterred from the market following mortgage tax relief cuts and increased stress testing implemented by the PRA at the beginning of the year. Encouraging them to reduce overheads to cover mortgage payments will only lead to poorer quality rental accommodation and increased costs being passed on to tenants.

The same report reported, the average landlord spends 34% of their income on their rental properties – over a third is a considerable amount and only set to increase.

This is terrible news for a market which gives so much, not only the economy, but people in Britain, who need quality rental accommodation at an affordable price.

Despite these changes, we have access to the entire lender market and can assist with this type of borrowing. To speak to one of our expert brokers, get in touch with us and we would be happy to discuss your requirements.

Arrange to speak to an Enness Broker