The Bank of England has proposed that buy-to-let investors should be limited on the amount they can borrow.
According to the Prudential Regulation Authority (PRA), which is part of the Bank, lenders should take into account landlords’ wider financial circumstances – not just the possible income from their rental proceeds.
“This is interesting – and potentially restrictive to many who wish to invest in property – because of the reduction in the amount people would be allowed to borrow,’ says Rob Dolbear, Managing Director of HCR.
“These proposals follow hot on the heels of increased Stamp Duty for many of those owning more than one residential property, with the government keen to limit growth in the buy-to-let market.
“Now the Bank of England wants to minimise losses by ensuring that potential landlords are able to afford their new investments.
“The suggestion is for lenders to take into account all costs associated with buying a new property, any tax liabilities, living costs – and a landlord’s additional income.
“Interest rates are another important consideration – with the Bank of England advising that lenders look at potential rises over five years from the start of a mortgage.
“Records show that 75 percent of lenders already adhere to these stricter stress tests – but there are major concerns about those who do not.
“Inappropriate lending has the potential to damage the economy at a time when any destabilisation could spell disaster. So this move does make perfect sense.
“At HCR, we’re fortunate to work in partnership with high calibre landlords across the UK, who provide our clients with quality properties for their relocating employees.
“And we’re confident they consider their financial responsibilities as carefully as they do their moral obligations to the tenants they are housing.”