New mortgage rules baffling one third of landlords

According to a recent study undertaken by Shawbrook Bank, a third of buy to let investors are unaware of how changes to regulations will impact their ability to borrow or refinance their rental property portfolio.

The new regulations, which were introduced in September 2017, make it tougher for landlords with four or more mortgaged properties to borrow money.

They are designed to reduce irresponsible lending and make buy-to-let mortgage and lending requirements tighter, including the introduction of an interest rate dependent stress test on new mortgage applications.

Lenders are now obligated to review the viability of a landlord’s entire property portfolio before making a decision on a new application – something which could have a real impact on multi-purpose landlords (anyone with more than four properties is now classed as a portfoiio investor), especially if they are operating on increasingly squeezed margins.

However, despite these fairly rigorous changes to the market, 28% of the brokers surveys in Shawbrook Bank’s report revealed that their clients were completely unaware of the new rules.

A further 61% admitted that whilst their clients had a vague understanding of the regulations, they did not fully understand how they would impact them, or the ins and outs of the new rules.

This survey highlights the critical need for more education in the investor market regarding the impacts of regulatory change. The benefits of increased awareness are two-fold. Firstly it should help prevent clients from sleepwalking into a problem and allow them to adjust their investment strategy accordingly. Secondly, according to our research, brokers are also seeing increased enquiries from landlords which demonstrates that there are still opportunities for business growth.

Karen Bennett, managing director of commercial mortgages at Shawbrook Bank

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