Will Bank of England’s buy-to-let mortgage crackdown really make a difference?
Tuesday 05 April 2016
With private landlords still reeling after the 2016 Budget confirmed there will be no u-turn over Government plans for buy-to-let mortgage interest relief cuts or a stamp duty surcharge on buy-to-let or second homes, the sector has been hit with yet another punishing blow.
The Bank of England has unveiled plans to tighten buy-to-let mortgage lending guidelines under which landlords will have to prove a property’s rental income is sufficient to provide a comfortable enough margin above their mortgage interest payments.
Landlords will also have to factor-in the higher tax bill which George Osborne’s much-maligned buy-to-let tax changes will trigger and various other fees and charges.
Mortgage experts have warned that the measures could mean buy-to-let mortgage approvals being cut by a fifth and landlords struggling to re-mortgage properties when their current deals expires.
But, as Nils Pratley points out in The Guardian, even after the measures were announced lenders are expected to decrease buy-to-let lending by just 3 per cent – from 20 per cent to 17 per cent – according to the Bank of England’s regulatory arm, the Prudential Regulatory Authority.
He said: “In reality, those stricter standards are merely sensible ones that most lenders have adopted already. The Bank is only talking about testing a borrower’s ability to pay an interest rate of 5.5 per cent when all tax liabilities are properly taken into account.
“That is hardly onerous when fixed-rate deals in the buy-to-let market are generally pitched around the 3.5 per cent mark.”
Council of Mortgage Lenders says rental demand is still strong
Meanwhile the Council of Mortgage Lenders (CML) continues to pile pressure on the Government’s policy of private-rented sector persecution by pointing out that, although the number of households in the private-rented sector fell by 100,000 in 2014-15 there was no corresponding increase in new home-owners.
The CML continues to highlight its concerns that demand for private-rented accommodation remains very strong for a various reasons - including population growth, lifestyle changes, economic migration and the free movement of labour – with no serious alternative to buy-to-let forthcoming in Government policy.
And with new-build construction continuing to fall well-below the requirements many are left wondering why the George Osborne continues to hammer a private-rented sector which is helping to meet the UK’s housing needs
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