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Bank of England confirms tougher buy to let mortgage lending regime

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Wed 30 Sep 2015

Bank of England confirms tougher buy to let mortgage lending regime

The Bank of England’s Prudential Regulation Authority has confirmed that tighter regulations will apply to lenders providing mortgages for buy to let investors.

These were first mooted early in the spring when a consultation document was released.

“The PRA’s actions are intended to bring all lenders up to prevailing market standards and guard against any slipping of underwriting standards during a period in which firms’ growth plans could be challenged by the changing economic landscape and the impact of forthcoming tax changes” says a statement from the authority.

The new rules set out minimum expectations that lenders should meet in underwriting buy-to-let mortgages, specifically:

- Affordability assessments should take into account a borrower’s costs including tax liabilities, verified personal income and possible future interest rate increases - so-called stress tests;

- Lending to portfolio landlords (defined as being individual with four or more mortgaged buy to let properties) should be assessed using a specialist underwriting process.

The PRA says most of these changes are likely to be introduced from January 1 with more complex changes from September 30 next year. The changes are in line with those predicted for some months and many lenders say they are already implementing them.

The authority says it will review buy to let lending again in early 2018 to monitor lenders’ implementation of the new rules.