Landlords urged to re-mortgage ahead of tougher BTL lending criteria

National Landlords Association reports rise in re-mortgages as landlords look to limit exposure to new Buy to Let tax regime.


Landlords are being urged to re-mortgage before tougher Buy to Let lending criteria, due to be introduced next month, make it more difficult to obtain finance.

The call comes as the proportion of Buy to Let re-mortgage transactions – as a share of the total lending market – has risen over the last few months.

A diminishing demand for new Buy to Let loans has driven many lenders to slash mortgage rates.

Now, the National Landlords Association (NLA) says the rise in re-mortgages is down to landlords looking to limit their exposure to the new Buy to Let tax regime.

The forthcoming tightening of lending criteria is the latest in a series of attempts by the Bank of England’s Prudential Regulation Authority (PRA) to cool the Buy to Let market, following measures introduced earlier this year.

The NLA’s most recent Quarterly Landlord Panel shows that landlords are already finding it harder to arrange mortgages, with 43% saying the process of obtaining finance has become more difficult since the beginning of the year.

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.

With just over a month before the second phase of the PRA’s underwriting standards are due to be implemented, the NLA is urging any landlords thinking about re-mortgaging not to wait any longer.

Chris Norris, NLA head of policy, said: “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”.

Case Study

Jeff, who has been a landlord for fourteen years and has seven properties in Lincolnshire, says it’s becoming harder to get finance because lenders view him as high risk.

“After the 2008 economic crash, my outstanding debt changed the way lenders viewed me, and now I’m regularly either refused or charged higher rates if I want to take out finance.

“Lending regulations and policy need to be changed in order to incentivise investment in rented housing and return the market to a healthy level.

“The PRA’s new standards will only make things worse and make it harder for small scale landlords like me who are in a position to provide a valuable source of housing.”

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