New rules for lending to portfolio landlords come into effect on September 30.
Portfolio landlords are defined as ones who own four or more properties. The new regulations affect the underwriting of commercial mortgages by lenders. The rules are designed to ensure that a landlord’s business is profitable so that they can afford to keep up with the mortgage payments.
To prove the liability of their business, landlords will need to provide an increased amount of documentation. This will need to be checked by the mortgage broker and the lender, which will increase their workload.
The changes have been instigated by the Prudential Regulation Authority which is part of the Bank of England. They want lenders to be more cautious when lending to portfolio landlords. Some financial experts feared that lenders might stop lending to portfolio landlords because of the extra complexity, but no lender has yet said that they will pull out of this sector of the commercial mortgage market.
The new regulations could discourage some landlords from purchasing extra properties. Sam Barker, writing for the website mortgagestrategy.co.uk in August 2017, argues that large landlords should be encouraged. He said:
“Ultimately an experienced professional landlord will, nine times out of ten, provide better quality housing for their tenants and we should be encouraging this professional approach, whilst keeping an eye on quality and maintenance.”
There could be an increase in commercial mortgage applications in August with landlords looking to make a move before the end of September deadline.