Simon Tyler of Tyler Mortgage Management said he was already being approached by worried clients concerned they will be unable to remortgage when they come to the end of term, once plans laid out by the Prudential Regulation Authority (PRA) come into effect.
This week the PRA published a consultation paper outlining minimum expectations for buy-to-let lenders to adhere to when underwriting deals.
Its supervisory statement recommends lenders take borrower’s lettings costs into account, alongside verification of personal income, with future interest rate increases factored into affordability tests. It has also proposed a specialist underwriting approach for landlords with four or more properties in their portfolio.
Tyler said the situation was reminiscent of the impact created by the Mortgage Market Review, which left many people unable to refinance their homes due to changes in affordability requirements.
He added that the PRA’s plans could lead to a repeat of the MMR, with lenders interpreting the regulations in “an overly cautious way”.
“It is a worrying situation because lenders were initially highly inflexible when the Mortgage Market Review was introduced in 2014 which set down new affordability requirements.
“We have to remember that there remains a huge demand for rented property, and we should be very careful about reducing supply while at the same time we are clearly not building enough new houses to meet demands of first time buyers or cool the market through more natural mechanisms,” Tyler said.
“Is the government going to “magic up” the missing deposit for first-time buyers to buy second hand property being sold by landlords who are exiting the market because they are worried by all these changes? Clearly that is never going to happen, so we must be careful not to precipitate an untimely market correction with heavy handed regulations.”
