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It was not too long ago that buy to let lenders were queuing up to offer landlords great mortgage deals. Now, though, the buy to let mortgage market is undergoing a radical change in response to government tax cuts and Bank of England’s regulatory changes for buy to let mortgages.
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Income-Cost Ratio Increasing
Nationwide, the second biggest buy to let mortgage lender in the UK, has announced that it will require landlords to have a much larger income in proportion to their mortgage costs.
“In order to help landlords safeguard positive cash flow, as future tax relief changes begin to phase in from April 2017, we’re making the following changes – rental coverage requirement increased from 125 per cent to 145 per cent, and the reduction of the maximum loan-to-value proportion from 80 per cent to 75 per cent.”
Minimum 40% Deposit
Experts are predicting that it won’t be long before mortgage lenders are asking for a minimum 40% deposit from landlords, and in low yield areas such as London, many landlords will face an uphill struggle to secure extra mortgage finance.
“In London where yields are down to 2% or 3% you’re only going to be able to get a 60% mortgage from now on. Landlords are going to have to put more cash in,” says Andrew Montlake from mortgage broker, Coreco.
“It’s likely that these costs will be passed onto tenants, so the cost of renting will go up, too.”
