New restrictions on buy-to-let borrowing creates Section 13 onslaught
Following the Mortgage Works’s decision to limit the amount landlord investors are allowed to borrow, UK mortgage lenders across the board are expected to follow suit.
Announced last week, from the 11th May (2016) The Mortgage Works will tighten their rental cover requirement (the amount a landlord needs to take in rents compared to the cost of their mortgage repayments) from 125% to 145%. Provided this new criteria is met, Nationwide will then only lend to landlords with a minimum of a 25% deposit; instead of the 20% deposit previously prescribed.
These changes come in direct response to the Bank of England’s announcement back in March; that mortgage lenders would face stricter regulations when calculating buy to let mortgages. And now many experts predict that property investors will require a (minimum) 40% deposit when acquiring property in-light of these tougher lending rules.
Leaving landlords with no other option, is the answer for the UK’s 2 million landlords to begin Section 13 proceedings for their 5 million properties?
As we all know, buy-to-let investing is not the risk-free lazy-persons route to wealth that the landlord-critics thrive on making it out to be! And it cannot be ignored that:
- Between 1996 and 2013 the buy to let market has increased the UK’s housing stock by 2.5 million.
- Prices would have increased ten-fold if landlords in the PRS had not financed the 2.5 million increase in supply.
- Evictions and homelessness would have vastly increased too.
So lets ‘raise the roof’ by increasing rents and let the 9 million unhappy tenants challenge the government and lenders for us!