The regulations (which went live on the weekend) seek to minimise risky or irresponsible lending within the rental sector by subjecting new lending applications to stress tests by reviewing the rental income over an entire property portfolio to gauge profitability.
So, how will the new rules truly impact on landlords and what are brokers doing to cushion that blow?
Dire impact
As many brokers have pointed out, profitability issues could have a dire impact on potential borrowing if one property within a portfolio is deemed to be under-performing. If mortgage applications are refused on this basis, less affluent landlords, already hampered by rising tax, are more likely to be affected.
With the buy-to-let purchase market already in decline, there is concern that these new measures could cripple the sector, particularly given that some mainstream lenders are now indicating their reluctance to lend at all to people with four or more properties.
In addition, brokers are warning of greater workloads associated with new mortgage applications as well as the likelihood of increased borrowing costs in the future – a worrying picture for many
Unacceptable figure
But are brokers doing enough to protect the interests of their clients and their industry?
A survey of brokers indicates not. Almost unbelievably, the survey revealed that 31% of brokers knew of the changes but did not fully understand them or how to apply them to their business, 13% of respondents were unaware of the date that the changes would come into effect, while 2% were completely ignorant of the new regulations despite being announced almost a year ago.
In total, therefore, we can surmise that nearly 50% of brokers are unprepared for another huge regulatory shake up – a completely unacceptable figure.
Culture change
The conclusion must surely be that it is now imperative for our industry to abandon a culture that emphasises easy victories in favour of renewed vigour and a better knowledge of our business if we wish to succeed in the future.
We know that the mortgage world has become more complex in recent years (both for BTL and residential) and that these new regulations will be tricky to deal with in the short term.
There are no easy answers, however a willingness to step up to the plate is required. As an industry I am certain we are better than the results of that survey suggest.
