Buy-to-let mortgages harder to obtain, say landlords

A new survey of landlords by the National Landlords Association (NLA) has revealed nearly two-thirds of those aware of curbs on buy-to let-mortgages has said they are now harder to acquire.

The Bank of England’s Prudential Regulatory Authority (PRA) has instigated two changes to the system. The first, implemented in January last year, was a new requirement that lenders apply an interest cover ratio of 5.5 per cent on all products lasting less than five years. This came alongside stricter stress tests for buy-to let-mortgages that usually stretched to 125 per cent of the value of repayments.

A further measure in September placed a requirement on portfolio landlords – those with four or more buy-to-let mortgages – to submit to specialist underwriting when seeking further mortgages. These include affordability tests that look at the whole portfolio as well as the property and mortgage in question.

The survey revealed 63 per cent of those aware of the changes believe getting a buy-to-let mortgage has got harder as a consequence. The figure rises to 70 per cent for portfolio landlords.

Nearly half of landlords (48 per cent) believe it has made the process of getting a mortgage slower and nearly as many (46 per cent) believe it has reduced mortgage availability.

None of this is by accident, according to the NLA. It regards the measures as a specific attempt by the Bank of England to “cool the market”.

NLA chief executive Richard Lambert said: “These findings show that the PRA’s changes seem to be greatly affecting the ability of landlords to find new finance and increase their portfolios.

“Given that the private rented sector now makes up 20 per cent of the housing market, it is vital that professional landlords are incentivised to continue providing good quality affordable housing to those who need it. This appears to be achieving quite the reverse.”

Increased difficulties for landlords on getting buy-to-let mortgages come at a time when the cost of paying for a mortgage is at its most affordable in the last decade at 29 per cent of income, according to figures published this week by Halifax.