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Bank of England announces new lending limits for landlords
11 April 2016
The Bank of England has announced that it is looking at stricter rules for the amount of money landlords can borrow. The Prudential Regulation Authority, an essential part of the Bank, which is responsible for the supervision of banks, building societies, insurers and other financial organisations, has suggested the new limits.
A lender should not only consider the repayment of the mortgage itself for the landlord, but also all other costs included in renting out a property, the authority advised. They should also consider any personal tax liabilities the landlord might have as well as any additional income the landlord has that might be needed to support the repayments.
The Prudential Regulation Authority hopes that the new regulations will help prevent any potential credit losses for the industry. It says the new rules could curtail buy-to-let lending by 10% to 20% by 2019. It justified its intervention by saying there was an increase in mortgage arrears especially in landlords with portfolios, i.e. more than one property.
The announcement comes at a time of multiple tax and legal changes for landlords, which are seen as a potential impediment to the growth of buy-to-let landlord.
In fact, some estate agents claim they are already showing an impact on the industry. A 12 year high of sales by buy-to-let investors has been noted by 85% of estate agents, according to the National Association of Estate Agents (NAEA). This is said to be due to many property investors rushing through sales before the new Stamp Duty came into effect on 1 April.