Landlords are being urged to re-mortgage before tougher buy-to-let lending criteria is introduced during September.
The Prudential Regulation Authority is bringing in tougher rules for portfolio landlords – those with four or more rental properties – on 30 September.
It expects firms to adopt a more specialist underwriting process to reflect greater complexity of lending to portfolio landlords.
The National Landlords Association said the recent upswing in the proportion of buy-to-let remortgage transactions as a share of the market was down to landlords looking to limit their exposure to the new buy-to-let tax regime.
Chris Norris, head of policy at the National Landlords, said: “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.”
The forthcoming tightening of lending criteria is the latest in a series of attempts by the Bank of England’s Prudential Regulation Authority to cool the buy-to-let market and follows measures introduced earlier this year.
The PRA introduced tougher underwriting standards and affordability assessments on 1 January to make sure borrowers can cover the cost of their mortgage in the event of an interest rate rise.
According to the NLA, 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.
Furthermore, 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.
Norris 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.”
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