Criteria tightens on buy to let mortgage lending…
National residential property lettings specialist, Belvoir is urging thousands of British property owners classed as ‘accidental landlords’ to seek specialist buy to let advice from industry experts following a new European ruling on mortgage regulations. Accidental landlords are typically people who, after a change in their circumstances, struggle to sell their home, so end up renting it out. Divorce, separation, bereavement or job relocation are some of the reasons why owner occupiers hang on to a property to turn it into a ‘buy to let’ investment.
Adam Rastall who owns the Belvoir office on Mill Lane in West Derby, says: “Currently, in cases such as these, banks will usually allow homeowners to switch a mainstream mortgage over to a landlord loan or alternatively ask them to pay charges to be allowed to retain a residential mortgage and then rent the property.” “However, the UK Treasury has announced that new EU legislation, the ‘European Mortgage Credit Directive’ which comes into force in March 2016, will introduce partial regulation of Britain’s buy to let market – which could, potentially, make it more difficult for homeowners to make this simple switch. “Unlike mainstream owner occupier mortgages, buy to let lending for professional investment landlords is usually viewed as ‘business’, not ‘consumer’, borrowing. “But under this new Directive, the Treasury says that landlords who are letting a property “as a result of circumstances rather than through their own active business decisions” will now be classed as consumer not business borrowers, and will need to be covered by a tighter, regulated framework.”
Dorian Gonsalves, Commercial Director at Belvoir, says: “As with the introduction of any new legislation, it is important for landlords to get professional and realistic rental assessments from experts who understand the buy to let market as this will help to ensure that rental returns add up and landlords are able to meet the new lending criteria. “Whilst the changes will not affect mortgages taken out by regular investment landlords, they could impact on both existing and prospective ‘accidental landlords’ so we would recommend seeking out professional advice in advance of the new rules in 2016.”
Commenting on the EU announcement, The Council of Mortgage Lenders has said that many lenders could struggle to distinguish between ‘consumer’ landlords and buy to let professionals. Last year over 151,000 buy to let mortgages were taken out – representing 12 per cent of total UK lending. Industry experts predict a continuing buoyant market in buy to let, with a projected rise of up to 3 per cent in mortgage activity.
“If you are already an ‘accidental landlord’ in our area, or could be about to inherit a property that you intend to rent out, it would be beneficial for you to contact us for a free, initial consultation to discuss your aims and objectives, so that we can help you take a long term view of your property investment needs,” adds Adam. “As one of the UK’s largest and well established property lettings specialists we are able to offer a wide range of advice and services on a regional as well as national level and, importantly, use our local knowledge to help guide you through the opportunities available in our area.”
Established in 1995, Belvoir is one of the UK’s leading lettings agents with over 150 franchised offices. The company offers a specialist service in property rental, property management, residential lettings, buy-to-let and now property sales in selected locations. Each local Belvoir office is owned and personally managed by local owners, operating under licence from Belvoir Property Management (UK) Ltd.
