Stricter Buy to Let Borrowing Rules for Portfolio Landlords

Stricter buy-to-let borrowing rules come in for buy-to-let portfolio landlords from the end of September 2017. 

The measure impacts borrowers with three or more mortgaged buy-to-let properties who want to take out new loans. 

Under the new rules, individual and corporate landlords must provide financial information about all their properties, not just the one they intend to mortgage.

"If you want to make an application for a buy-to-let-mortgage on a new rental property, the lender will have to look at your entire property portfolio when they decide what mortgage deal they can offer on a single property," said Mark Lawrinson of London estate agents Portico. 

"If you have six properties and four are generating enough rental income to cover mortgage payments and then some, but the other two are not, your new mortgage application may not be approved by some lenders. 

"From October 1 2017, lenders will also require a full breakdown of rental properties, a business plan, and cash flow projection to support a new buy to let mortgage application."

Landlords are recommended to update rental valuations for their properties to confirm their loan-to-value before making a new mortgage application. 

Some lenders are already dropping out of the portfolio buy-to-let market because of the administrative complications involved with underwriting under the new rules. 

Santander and the Co-Op have already withdrawn from portfolio lending, and others are expected to follow. In contrast, others like NatWest have raised the bar to a minimum of 10 properties for portfolio deals. 

An estimated 8% of landlords face stricter mortgage affordability tests due to the change. 

The Bank of England argues the new rules will ensure landlords do not borrow more than they can afford to repay, which economists fear could undermine the financial security of lenders.