It said the Bank of England’s tough new banking regulation rules for all buy-to-let lenders, will have a knock on effect on students.
The changes mean that lenders require buy-to-let landlords to prove that they can cover their mortgage payments by 145% if their mortgage rate went up to 5.5%, in many cases. The change is a significant jump from the previous 125% coverage required.
StudentTenant.com said this will force new landlords to increase rental prices to be able to afford the changes. From next month, existing rules which allow landlords to offset mortgage interest against tax will also be phased out, restricting the amount of mortgage interest landlords can offset against tax on property investments.
Danielle Cullen, managing director at StudentTenant.com, said: “These changes risk students in the UK being put on the verge of a severe rental crisis. Not only are we going to see a hike in rental costs for students to offset the change in buy-to-let mortgage rates, we’re also going to see a huge fall in mortgage applications as it’s just not a worthwhile investment anymore.”
She said government is gradually pricing out new student landlords from the rental market, causing huge problems with the very limited supply already seen in certain areas.
Cullen added: “Unfortunately, it’s another costly setback for students who will have no choice but to pay the increased rental costs. There’s already huge pressure on students to cover the costs of bills, pay rent and enjoy their university experience whilst studying, and another increase in rental costs is adding more pressure.
“With the hike in university fees, lower maintenance loans and now the impact of the buy-to-let mortgage changes, it’s no wonder students are questioning whether all the debt and stress is really worth paying for higher education.”