The buy-to-let market has been hard hit in recent months. The restrictions placed on tax relief, additional Stamp Duty and potential liability of letting agents’ fees have all led to it seeming a less attractive option. Now, the introduction of the PRA changes on lending criteria for buy-to-let loans are increasingly making it challenging to secure a buy-to-let mortgage. The changes set out by the PRA are designed to maintain buy-to-let underwriting standards and ensure lending is efficient and secure.
Furthermore, the PRA also reconsiders what is defined as a ‘portfolio landlord’; once a landlord owns four or more mortgaged buy-to-let properties, they will be considered a portfolio landlord. According to the PRA, it’s such landlords who are much more likely to be in arrears.
Whilst the above might appear to only be an issue for people securing a buy-to-let mortgage, it will absolutely have an impact on the bridging mortgage market as well. As such, it is necessary for us, as brokers of bridging finance, to be cautious as well, and advise our clients accurately.
For instance, it is common for a client to approach us having found a buy-to-let property which requires work prior to being let out to tenants. In such instances, a short-term bridging loan would be needed in order to bridge the gap until the work is complete.
Once the property is habitable, a buy-to-let mortgage would need to be applied for. In such cases, we are required to prove to the bridging lender that the exit for the bridge will be the buy-to-let mortgage. If acquiring the buy-to-let mortgage is more difficult as a result of the changes, securing a bridging loan in the first place may also become more of a challenge.
However, for brokers such as Enness, working with such a diverse panel of lenders, we will be able to work with one which can take the client’s entire financial situation into account.