You are here: Home - Your Community - Poll -

‘Business as usual’ say brokers despite incoming PRA regulations – poll result

by:
  • 06/10/2016
  • 0
‘Business as usual’ say brokers despite incoming PRA regulations – poll result
It appears it is going to be business as usual for brokers as the buy-to-let market heads toward what could be a more subdued period following the Prudential Regulation Authority’s (PRA) regulations announced last week.

Under the new regulations rental incomes will need to be enough to cover assumed mortgage interest rates of at least 5.5% during the first five years of the buy-to-let contract which some industry players have suggested will force smaller landlords to retreat from the market.

All PRA-regulated lenders will be required to use strict affordability tests when assessing all buy-to-let applications. This will be in the form of either interest coverage ratio testing or by determining if a person’s personal income is enough to meet the mortgage repayments.

Borrowers with four or more mortgaged buy-to-let properties will be classified as portfolio landlords under the new PRA rules and will adhere to specialist underwriting standards.

Interestingly, holiday lets – buy-to-let properties that are occupied for a month or less – are exempt from the new PRA regulations, though industry experts have suggested it is only a matter of time until they are also included in under the regulations.

Firms will be required to implement the changes to interest coverage ratio tests and interest rate stress tests by 1 January 2017, with the remainder to be implemented by 30 September next year.

The new regulations are expected to bring a more consistent lending approach, although the strict guidelines face edging out less committed landlords.

The 3% Stamp Duty tax introduced in April this year brought a marked drop in activity in the buy-to-let market and the new underwriting regulations has been seen by some as the final nail in the coffin.

Despite this, a poll run by Mortgage Solutions found that the majority of brokers do not plan to combat the perceived drop in buy-to-let activity with 44% saying it is a case of business as usual.

Additionally, 22% of respondents said they plan to focus in on the buy-to-let remortgaging market and 23% said they will explore new sections of the market. While 11% of brokers said they would focus more on consumer-focused technology.

Lee Loizou, a mortgage broker for Start Financial Services, said: “Brokers have been hit by a lot of different rules in the past and lenders have been expecting these changes so brokers have had to adjust accordingly.

“If anything the 3% Stamp Duty has caused more of a problem than the PRA regulations.”

Loizou added the anticipated drop in activity in the buy-to-let market has already happened and lenders have already adjusted lending policy, he added.

 

Another mortgage adviser, who preferred not to be attributed agreed brokers will need to accept the changes for what they are and move forward but he felt that not all brokers can afford to have such a nonchalant attitude.

He said: “The problem with saying it is just ‘business as usual’ is that if a broker’s bulk of business was in buy-to-let then they’ve just lost a large chunk of activity.

“If you have a natural decline in one area then brokers are forced to explore other areas, but what those areas are is up to individual brokers to decide.”

The outlook remains uncertain for the once buoyant market but rumours the Stamp Duty Tax could be scaled back in  the Autumn Statement are already circulating.

 

 

 

There are 0 Comment(s)

You may also be interested in