NLA urges BTL landlords to remortgage as PRA borrowing rules near

Landlord filling out a remortgage form

The National Landlords Association (NLA) has made a bold appeal for buy-to-let landlords to consider remortgaging properties ahead of tougher borrowing conditions, set to take effect from the end of next month.

The clarion call comes as the number of buy-to-let remortgage transactions as a proportion of the total lending marketing, has already risen significantly over the past few months.

The increase, announced by the CML/UK Finance, comes in an environment where landlords are preparing themselves for conditions that will make it harder to borrow money, with the NLA stating it has already become more difficult to obtain finance for buy-to-let.

As the Bank of England’s Prudential Regulation Authority (PRA) introduces new rules around borrowing to buy-to-let applicants on September 30th, 2017, the NLA’s most recent Quarterly Landlord Panel indicates that conditions have already become tougher, with 43% of landlords saying the process of obtaining finance has become more difficult since the beginning of the year.

In addition, 53% of landlords said they have been required to provide additional evidence to support recent mortgage applications, including their tax returns, cash flow forecasts and business plans.

In this environment, the NLA is urging any landlords thinking about re-mortgaging not to wait any longer.

Commenting on the findings, Chris Norris, Head of Policy at the National Landlords Association (NLA), 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.

Commercial Trust has been aware of the issues surrounding the second phase of PRA Regulation in September, whereby the “supporting factor” applied in the borrowing assessment by mortgage lenders to Small or Medium Enterprises, is to be removed from buy-to-let applications from September 30th. To read more on this topic please the article PRA deadline for portfolio landlords and lending changes.

Jorden Abbs, head of operations at Commercial Trust, commented:

The introduction of the second phase of PRA changes on September 30th could have widespread implications for future lending levels for buy-to-let landlords.

It is interesting to see how the lending environment is perhaps already becoming stricter and this may well be the shape of things to come, as the NLA has eluded to.

Certainly in some circumstances remortgaging ahead of the changes might be an option to landlords, depending on personal circumstances. However, remortgaging will take a lot into account and I recommend that anyone thinking of doing so speaks to an expert first.

Commercial Trust can provide help on a variety of remortgage issues, depending on the individual’s circumstances. We can be contacted on 0808 1320109.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.