Bank of England suggests new lending limits for buy-to-let landlords

Property valueThe Bank of England has suggested that buy-to-let landlords should have limits placed on the amount of capital they can borrow to fund their investments.

In a new report the BoE (Bank of England) has advised that it might be a wise move for lenders to apply stricter guidelines when deciding whether a landlord is eligible for a buy-to-let mortgage. It floats the idea that lenders should investigate more than just the potential rental income on the investment property and that the landlord’s wider financial position should also be assessed.

The PRA (Prudential Regulation Authortity), part of the Bank of England, has proposed that lenders should also consider other costs a landlord might be liable for. These include; the costs associated with renting out the property, the landlord’s tax liability on the property, the landlord’s personal living and essential expenses, and their personal tax liability.  

A stricter interest rate stress test has also been suggested by the PRA to ensure that the landlord would still be able to afford all the associated costs if interest rates where to increase over a 5 year period.

If these suggested changes were to be implemented lending to landords could be reduced by up to 20% over the next 3 years. There is currently a consultation on the PRA’s suggested plans and no final recommendation is expected until later this year.

 

avatar
Posted by: Nicola Severn Categories: Uncategorized Comments Off on Bank of England suggests new lending limits for buy-to-let landlords

Comments are closed.