It looks like there could be tougher restrictions for landlords if The Bank of England gets their way. This means that they can dictate to lenders how much money buy-to-let investors can borrow, and landlords could face a 40% deposit to secure mortgage finance, the letting agent Countrywide has revealed.
Countrywide also revealed that if The Bank of England has their powers granted, then the Financial Policy Committee could ask lenders to “stress test” how much new landlords can borrow. Furthermore, lenders will have to ensure that the income landlords receive is more than the interest payments on their mortgages.
As it stands, lenders aim for 125% interest coverage of the mortgage from landlords for the property investment, to ensure that both parties have a degree of security (well more for the lenders). Findings from the Mortgage Market Review (MMR) has shown that landlords could face interest rates up to 7%, with higher repayments, meaning that landlords would have to fork out larger amounts of equity to attain mortgage finance. This could total up to an additional £40,000.
If The Bank of England gets granted their power, then the higher price tag for obtaining a mortgage for landlords could affect the rest of England and not just in London. Fortunately, with The House Crowd, this is one added stress that neither our investors nor ourselves have to worry about.
Banks and lenders 0 – The House Crowd and crowdfunding 1.