Portfolio landlords struggle to get mortgages after tougher PRA rules

BUY-TO-LET landlords with several properties are finding it harder to secure mortgages since tougher lending rules were introduced last year by the Prudential Regulation Authority (PRA), new research shows.

Nearly three-quarters of UK portfolio landlords have since struggled to get finance, according to figures from specialist lender Foundation Home Loans, based on research by BDRC Continental which surveyed 817 landlords.

When asked how they had been affected by the PRA regulatory changes which came in in September, 70 per cent of UK landlords with more than four buy-to-let mortgages said they had found it challenging to obtain finance for a mortgage or remortgage. Half (51 per cent) of landlords owning between one and three buy-to-let mortgages said the same.

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The PRA changes brought in stricter rules for buy-to-let landlords, meaning lenders now have to look across a landlord’s entire portfolio, taking into account cashflow and their personal borrowing, the landlord’s experience in the buy-to-let market, rental income and how possible future interest rate rises, bills including council tax and utilities, and even the location of properties, to assess affordability.

Borrowers with four or more mortgaged properties are classified as portfolio landlords and subject to the new standards. As a result, almost half (48 per cent) of landlords aware of the PRA changes said they thought it would slow down the process of securing a mortgage. Two-thirds of those who own 11 or more properties thought the range of mortgage products available to them would be reduced, while 28 per cent believed the changes would make it more likely that their mortgage application would be rejected.

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Jeff Knight, marketing director at Foundation Home Loans, said: “Whether these figures are to do with a natural period of adjustment or become the new norm remains to be seen. Nonetheless, in order to make this as smooth a transition as possible, brokers and lenders must work together to ensure things do not become unnecessarily challenging.”

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