From 30 September, complex underwriting criteria for landlords in possession of four of more properties will be applied to new applications. Lenders operating in this market will be testing out their policies on the first wave of applicants from the start of October. “Don’t let your clients be the guinea pigs”, was Whittaker’s advice to an audience of brokers at The Specialist Lending Event in Harrogate.
The Prudential Regulation Authority (PRA) has decided that any landlord with four or more mortgaged properties will be known as a portfolio landlord from quarter four this year.
It wants lenders to assess a portfolio landlord’s experience, the properties they own and their existing mortgages. This includes the assets and liabilities of the borrowers, including any tax liability, the merits of any new lending in the context of the borrowers’ existing buy-to-let portfolio together with their business plan.
The regulator also wants historical and future expected cash flow associated with all of the borrowers properties to be assessed.
Lenders, however, have yet to announce how this will be reflected in their policies and processes.
“Get your landlords organised,” Whittaker urged intermediaries. “Who wants to play guinea pig to a lender which historically has not showed any interest in a landlord’s income. They are now trying to get to grips with a totally new process. If you put your clients through that process first you will only be helping that lender think of the questions it had not thought of.”
Brokers who have landlord clients who are going to be regular transactors post 1 October, said Whittaker, need to start getting their paperwork in order now because they will come under greater scrutiny.
Mortgages For Business’ market analysis predicts an overall buy-to-let lending contraction of around 18% by 2018 as lending falls from an expected level of £40bn in 2016 to £33bn by 2018. However, it forecasts limited company lending to grow from £3.5bn by the end of this year to £6bn by the end of 2018.
As the market changes to favour a limited company structure from a tax position, there will be a ‘cavalry charge’ towards 15 lenders servicing this demand. This stampede, said Whittaker, will cause service level chaos and as the industry saw in 2008, lenders will buckle under the pressure and brokers will cascade to the next best bank or building society destroying SLAs as they go.
“Don’t always think about price, it’s about who is going to deliver to you on time,” he added.
The Specialist Lending Event continues at The Mere Golf Resort & Spa, Cheshire tomorrow. Visit our events website to discover more locations.