Tougher rules for buy to let landlords


Tougher rules for buy to let landlords


From September 2017, the Bank of England’s Prudential Regulation Authority (PRA) is expected to set out tougher buy to let requirements, which will see portfolio landlords suffer.

These tougher requirements will see mortgage companies take a tougher stance on borrowing to landlords with multi-property portfolios, under 1 million pounds. Lenders must ensure that landlords generate rents relative to their mortgage costs. Mr. Boulger, of John Charcol Mortgage Brokers, stated; ‘the tougher stance could potentially remove about 50% of the lenders on the market’.

Unfortunately, this will mean tenants are facing yet more rent increases; as landlords raise their monthly rent to meet the lenders requirements. The UK’s number 1 property portal, Rightmove, predicts that rents will rise by 4% across the UK in 2017 (excluding London). During 2016, the rent increase was half of what it was in 2015, at just 1.6%. However, experts say that this was due to the extra 3% stamp duty that was implemented in April 2016, meaning fewer prospective landlords could afford to buy. This therefore decreased the available rental stock. Landlords who can still afford to buy with the additional stamp duty will be looking to increase their monthly rental income to compensate for this additional cost. In addition to higher stamp duty and tougher lending, further mortgage tax relief reductions for landlords are likely to see demand outstrip supply in 2017. This is due to less tax relief being made available to landlords. At the moment, landlords can claim tax relief on their mortgage interest payments. Reducing how much tax relief they can claim will reduce their monetary income and therefore less landlords will seek to increase their rents- again to compensate.

Back when the April 2016 budget was announced Marcus Jones, the Local Government Minister and Conservative MP stated: “Banning or capping letting agent fees would not make renting any cheaper for tenants- tenants would still end up paying but through higher rents”. Predictions of rental increases continue to support Mr. Jones’s statement.