BTL investors face stricter borrowing requirements

BTL investors face stricter borrowing requirements




Buy-to-let landlords have been warned that they stand to suffer if lenders introduce stricter borrowing criteria in the wake of Brexit.

Crowdfunding platform Property Partner claims that the Bank of England may advise lenders to follow the example of Barclays and Nationwide by raising interest coverage ratios (ICR) to 145%.

If this is the case, Property Partner predicts that some landlords could be forced to place deposits of up to 60% in order to afford a buy-to-let property.

Dan Gandesha, CEO of Property Partner, said: “This lending squeeze will only increase the financial barriers [of] entry to the market, restricting access to only cash buyers or those with hefty deposits, and potentially forcing some existing landlords to sell up.

“Highly leveraged landlords seeking to remortgage could face a nasty shock if their bank tells them they no longer qualify for the same loan-to-value mortgage.”

Analysing mortgage affordability across 85 towns and cities in the UK, Property Partner estimated that 59 would require a deposit of at least 40% under the new ratio.

The firm found that Worcester, Cambridge and Chichester would require the largest deposits to cover a 145% ICR, with a 61, 60 and 59% deposit respectively.

Dan insisted that this potential change was one of many which had hurt landlords in recent months, citing the 3% stamp duty surcharge earlier this year and a gradual withdrawal of mortgage interest tax relief from April 2017.

He added: “Traditional buy-to-let landlords have had it tough of late with successive assaults on their potential income.

“…[These changes] will put further restraints on landlords’ profits.”

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