Key note speaker at the The Buy To Let Market Forum, Ian Boden (pictured) from Aldermore, urged brokers to act now to protect clients from rising costs and tougher affordability tests.
The head of commercial mortgages and portfolio management said intermediaries should make it clear to landlords the current criteria climate looked set to change.
“If you’re talking to one your clients who is a buy-to-let landlord thinking about restructuring their portfolio, thinking about leveraging and borrowing more and considering additional property purchases, I suggest they act now rather than later,” he said.
Boden also broached the raft of regulation on the horizon, including the consultations on capital levels which should be held for buy to let and the Prudential Regulation Authority’s (PRA) proposals for a wider affordability assessment for portfolio landlords and a minimum stress test.
“There is continued debate around the amount of capital a bank needs to maintain and support a buy-to-let book,” said Boden. “If that is increased then funding costs will rise which will have a knock on effect on the cost of the mortgage.”
The PRA is proposing to enforce a ‘specialised’ affordability assessment for landlords who own four properties or more which is expected to cover the total cost of managing a buy-to-let property.
Aside from the mortgage interest cost and the rent received; taxation costs, management fees and letting agent costs, general care and ongoing maintenance may also be taken into consideration. A stress of 2% of the interest rate or a minimum of 5.5%, whichever is the higher, has also been put forward by the regulator.
Boden added: “We know what the world is like now, but these policies could create some changes for us later on down the track.”