Buy-to-let landlords have come under attack from the taxman and now also from the Bank of England, which could make landlord mortgages harder to obtain.
Lenders will now have to take into account a landlord’s other expenses, including their tax bill, when assessing whether or not they can afford to borrow.
New affordability tests introduced ahead of mortgage interest relief tax changes from April 2017 have already made life more difficult for landlords, according to Nationwide, the UK’s largest building society.
Fresh data shows that Nationwide’s buy-to-let subsidiary, the Mortgage Works, lent £2.8bn in the six months to September 2016, down from £2.9bn in the same period a year earlier, with the lender citing the new affordability tests as the main obstacle denying potential landlords fresh finance to acquire property.
“The buy-to-let sector is going through a period of substantial change resulting from new rules on landlord taxation [and] guidance on underwriting and affordability standards,” said Nationwide chief executive Joe Garner.
Like many lenders, Nationwide tightened up its lending criteria for buy-to-let landlords earlier this year by upping the rental ratio cover from 125% to 145%. It also dropped its maximum LTV from 80% to 75%.
“As a responsible lender we took the decision to lead the market in making changes to our affordability assessment criteria to ensure our borrowers do not overstretch themselves. This is expected to result in lower buy to let lending in the second half of the year,” Garner added.
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