PRA Regulation Changes to Buy-to-Let Properties

The PRA are making changes to bring lenders up to current market standards and prevent the slipping of underwriting standards

The Prudential Regulation Authority (PRA) announced in September 2016, following a review of the Buy-to-Let (BTL) market, its expectations of firms’ underwriting standards that apply to certain sectors of the BTL market.

The changes are intended to bring lenders up to current market standards and prevent the slipping of underwriting standards during a period where firms’ growth plans could be challenged by the changing economic landscape and the impact of forthcoming tax changes. 

Earlier this month, the first phase of the PRA’s new minimum changes came into effect. Under these new rules, affordability assessments must take into account borrowers’ costs, verify any personal income being used to supplement the rental income and take account of possible future interest rate increases. In addition to this, lending to landlords with four or more mortgaged BTL properties must undergo a specialist underwriting process. The new PRA regulations come as one of several recent changes to the BTL market, including the 3% rise in stamp duty land tax in April 2016 and the phased reduction in tax relief on mortgage interest payments over the next four years from April 2017.

This phase of changes could prove to be tough for BTL finance, as lenders will need to become much stricter about who they lend to.

The PRA will continue to monitor the BTL market and see how the new standards are impacting new BTL lending.

If you’re looking to secure a loan against a buy-to-let property, give the Broker Team a call on 01709 321665 and they’ll be more than happy to help.