IMLA warns against ‘one-size-fits-all’ approach in buy to let

The trade body’s statement comes just after the Prudential Regulation Authority (PRA) published its consultation on underwriting standards to act as a ‘guardrail’ in the buy-to-let market.

Among its proposals, the PRA has suggested that investors with four or more properties, otherwise known as portfolio landlords, should be subject to specialist underwriting by lenders.

Peter Williams, executive director of IMLA, said that while the aim of best practice in the industry was welcome, there were still considerations for lenders that should be clarified.

“On the face of it, most lenders will have little to fear from these proposals, especially given that many have already undertaken similar assessments. However, it is important that these rules do not set minimum standards at a level any higher than is necessary to achieve a sustainable level of activity,” he said.

“We would also caution against a broad-brush ‘one-size-fits-all’ approach that risks dumbing down the market. It is encouraging that the rules include some flexibility for lenders to use other disposable income in affordability assessments. To make the proposals practical, the consultation should consider how lenders will need to model landlords’ costs and also how they calculate the level of rent for affordability assessments.”

Williams added that it was “odd” that the potential impact on the supply of rented property and levels of rent had been excluded from the PRA’s impact assessment.

“This is critical at a time when buy to let is already feeling the full force of regulatory layering, with changes to stamp duty and mortgage tax relief underway and the debate ongoing about the macro-prudential controls which are still to be introduced. We assume the PRA standards and any Financial Policy Committee requirements will be aligned but we now have a further period of uncertainty before that can be clarified.”