We’ve looked on with interest at the market developments taking place in the buy-to-let sector, particularly when they come from both political and regulatory angles, which we are all too familiar with.
Indeed, it’s possible to see a similarity and a continuation of policies which have previously been aimed at the residential market, being moved across to buy to let. Take for instance, the recent PRA consultation calling for for stricter stress testing, tightened affordability measures on potential borrowers and more stringent underwriting criteria, in particular for portfolio landlords. These are not too dissimilar to the responsibilities required of residential lenders in a post-MMR environment.
The big question for advisers in all of this is how it will affect business levels, and how it will impact on their ability to secure and look after buy-to-let clients. The good news is that one senses lender appetite won’t be impacted too much by the PRA measures, for a start, the PRA’s suggestion seems to be that most lenders are already meeting these requirements.
However, the impact of specific measures aimed at the landlord community could be rather more far reaching. We’ve already seen the increased activity levels the Stamp Duty deadline ushered in, but how will this hold up in an environment where it costs 3% more in Stamp Duty to purchase? Add in the incoming changes to tax relief on mortgage interest payments, and there appears to be another obstacle placed in the way for those landlords wishing to either enter the sector or add to their portfolios.
Are the days of the ‘amateur landlord’ numbered? Perhaps not, but there is no denying the fact that the government intends to bring more corporate money into the private rental sector at the expense of individual landlords. While there may be suggestions that the measures are designed to remove ‘rogue landlords’ from the market, one has to question how changes to taxation will achieve this.
The further bad news for landlords, and their advisers, is that judging by recent history one would be surprised if the powers that be stop here. Indeed, we know only too well that lender-focused action such as increasing capital reserve requirements and placing restrictions on the amount firms can lend in certain product areas has been the next step in the mainstream market.
One wouldn’t be surprised therefore to see such action extended to buy to let especially given that some commentators felt the underwriting measures didn’t go far enough.
Given the fact that landlords are never likely to be flavour of the month, and there appears to be political capital to gain in hitting them and their lenders harder, its not unlikely that further action will come sooner rather than later.