Tough Checks Being Introduced for Buy To Let Mortgages
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Tough Checks Being Introduced for Buy To Let Mortgages

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Carl Shave Carl Shave | December 21, 2015

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Banks and Building Societies are set to introduce tougher checks on potential landlords and buy-to-let borrowers following fears that many landlords may struggle with the possibility of higher costs as a result of changes to the Buy to Let tax regime (announced in the Summer Budget). The government is set to introduce swingeing cuts on tax breaks on mortgage interest payments from April 2017. Thus far, some lenders have already notably responded, with Barclays being one that has actively made their criteria more strict in relation to the maximum loan amount being permitted. This has involved introducing tougher affordability checks by stipulating that the rental income of the property has to cover 135% of the mortgage payment when calculated at their specified rate. This has risen from the typical industry standard of 125%. An open letter to mortgage brokers from Barclays said that they were being a ‘responsible lender’, ensuring that our aspiring landlord customers can afford the increase in tax liability once these changes come into force.’ Experts within the industry have suggested that other lenders are very likely to follow suit.

The Experts View

Although the but to let market continues to be a growing sector within the industry and indeed a typical profitable one for lenders, with the changes in the new tax laws specifically aimed at landlords, lenders are acting quickly to ensure they continue to lend money sensibly. With the usual buy to let mortgage already requiring a minimum 25% deposit, the new criteria being introduced by lenders such as Barclays, will perhaps only have a small impact in certain pockets of the country and is unlikely to cut lending levels too noticeably. As the changes by those lenders that have already reacted have been few in number so far, it will be interesting to see how many follow the trend, or if the perception will be by certain lenders that the current calculations they use will continue to be adequate. It will also be interesting to see how the levels of rents are also affected by the recent tax changes as landlords alike continue to monitor their rental yields. If you would like to discuss applying for a buy-to-let mortgage with our advisors, get in touch with us today. You can call us on 0800 114 3964 or use our contact form.