If the existing mortgage deal on your buy-to-let property is about to come to an end, you may want to change to a new deal sooner rather than later, especially if you are planning to move your existing home loan from one provider to another in order to take advantage of record-low interest rates, because lending criteria is about to get tougher.
With just over a month before the second phase of the bank of England’s Prudential Regulation Authority’s underwriting standards is due to be implemented on 30 September, as part of its efforts to cool the buy-to-let market, the National Landlords Association (NLA) is urging any landlord thinking about remortgaging not to wait any longer.
The call comes as the proportion of buy-to-let remortgage transactions, as a share of the total lending market, has risen over the last few months, as more landlords look to limit their exposure to the new buy-to-let tax regime.
With demand for new buy-to-let loans falling, several lenders have made significant cuts to their rates in a tug-of-war for new mortgage business, presenting landlords with an opportunity to reduce their monthly mortgage payments.
The NLA’s most recent quarterly research shows that landlords are already finding it harder to arrange mortgages, with 43% of those surveyed saying the process of obtaining finance has become more difficult since the beginning of the year.
Furthermore, more than half – 53% - of landlords report that they have had to provide additional evidence to support recent mortgage applications, including tax returns, cash flow forecasts, and business plans.
Chris Norris, head of policy at the NLA, commented: “Since the PRA regulations were introduced in January, the marketplace is looking considerably more complex. It was always likely that lenders would start to demand more evidence from applicants, and landlords are already feeling they have to go further to prove that they can afford finance.
“Changes to buy-to-let taxation will eat away at many landlords’ profits and make it more challenging for them to manage their businesses. As a result, many are looking to limit their exposure to the changes, which is why we’ve seen a rise in re-mortgaging.
“However, the situation is due to worsen from September and while it may not be financially advantageous for everyone, if you’re considering re-mortgaging or expanding your portfolio then do so now to avoid any further difficulties”.