Buy to let regulation to increase

Posted by Erika Bone in Mortgages on 22 December 2015 - Erika is a Credit Analyst at checkmyfile

Over the coming months it is presumable that the UK Government and the Bank of England will be implementing a number strategies to effectuate stricter regulation of the buy-to-let property market.

16% of all mortgage stock in the UK pertains to the buy-to-let market, which in real terms equates to 1.7m individual mortgages. HMRC also recorded 2m individual landlords declaring rental income on their 2012-13 tax returns. Since the financial crisis, lending to landlords has increased on average by 5.9%, compared to 0.3% growth in the residential market.

These statistics seem to point towards the return of a buoyant housing market, augmented by a growing appetite to invest in property, and at face value this should surely be viewed in a positive light by both the Government and the Bank of England. This, however, is not the case as the Bank of England’s Financial Policy Committee has expressed grave concerns over the predominance of the growth of buy-to-let mortgages and has contended that this new trend poses a very real threat to the stability of the UK economy.

The problem would arise if there was a sudden drop in house prices. In a poll featured in the FPC’s December Financial Stability Report, 45% of landlords intended to sell if house prices dropped by more than 10%. This would exacerbate any downturn and could potentially lead to a large-scale property price crash.

The fear that investment property might be “disproportionally vulnerable” to a drop in house prices and with proven statistics issued by the Committee that show that losses on buy-to-let loans are almost twice of those incurred when lending to owner occupiers has now prompted the Bank of England to request greater powers to regulate the buy-to-let mortgage market.

Since April The FPC has had “powers of direction” over how much home-owners can borrow for a mortgage, but can only issue recommendations to lenders regarding buy-to-let loans. The committee has now appealed to the Treasury to give the Bank of England powers to place a number of limitations on buy-to-let mortgages. These could include reductions in loan to value, debt to income and interest coverage ratios.

The FPC want the Treasury to act quickly and would like to be given the new powers sometime in the New Year. This would help prevent a rush by landlords to buy new property before the Government’s new tax legislation comes into force with the advent of the new tax year. The new tax regulations will impose a 3% Stamp Duty surcharge on anyone buying a new property that will not be used as their main residence and will remove the high-rate tax relief that landlords currently receive on mortgage interest payments.

These new legislative restrictions, coupled with the anticipated establishment of new powers for the Bank of England, have disappointed a number of key bodies in the property sector with Alan Ward, Chairman of the Residential Landlords’ Association remarking, “Osbourne’s got to be very careful that he doesn’t frustrate investment in the Buy-to-let sector”.

This of course is the crux of the issue. The Government and the Bank of England have to encourage and maintain a healthy balance between property for investment, first-time buyers and the orthodox housing market and to prevent a “debt-fuelled boom” hurting the property market. Whether this can be achieved by greater regulation and higher taxes will become apparent within the next year or so.

Check Your Credit Report for Errors

30 Day Free Trial, No Obligation

Aspects of Mortgage Lending Decisions

The vast majority of mortgage providers keep their lending criteria a closely-guarded commercial secret, which makes figuring out your chances of getting accepted for mortgage tricky, though a mortgage broker may be able to point you in the right direction based on your credit history.

Published on 16 Apr 2019 by Kevin Pearce

Full Article

Getting a Mortgage After Changing Jobs: Is It Possible?

When you apply for a mortgage there are probably nuggets of advice you’ve heard time and time again to make sure you increase your chances of getting accepted; like using a credit card to build up a credit history if you haven’t borrowed much in the past, or getting an agreement in principle to give you an idea of how much you’re likely to be able to borrow.

Published on 9 Apr 2019 by Jamie Mackenzie Smith

Full Article

Can You get A Mortgage With A Default, CCJ or Arrears?

Even for homeowners that have been through the process before, applying for a mortgage can be a lengthy and often stressful process. For anyone with a history of adverse credit, it can be even more disconcerting - especially if you’re not sure how negative information on your Credit Report such as late payments, Defaults, or Court Information might affect a potential mortgage lenders’ decision.

Published on 12 Feb 2019 by Jamie Mackenzie Smith

Full Article

How your credit file could help you get a good mortgage deal

How to use your credit report to get a great mortgage deal in 2019

There have been plenty of reasons to get people thinking about making that first leap onto the property ladder in recent months, including Help to Buy schemes, the removal of stamp duty charges for about 95% of first time buyers and an increase in affordable houses being built.

Published on 20 Nov 2018 by Kiah Phillips

Full Article

Why Mortgages Might Be Agreed In Principle Then Declined

Getting your mortgage Agreed in Principle (also known as a Decision in Principle or AIP) is an important step towards finally getting into a new home, but the relief of getting an AIP can be short-lived if you then get turned down when applying for the actual mortgage.

Published on 29 Oct 2018 by Jamie Mackenzie Smith

Full Article

Am I More Likely to Get a Professional Mortgage?

Before the Credit Crunch of 10 years ago, finding a mortgage valued up to 95% or even 100% LTV and at more than five times your salary level wasn’t difficult - in fact it’s since become clear that it was too easy and was a financial disaster waiting to happen. As such, mortgages have become harder to get accepted for then, with stricter regulations coming into place ensuring that mortgages are only granted to those who can truly afford them.

Published on 14 Sep 2018 by Jamie Mackenzie Smith

Full Article

The best credit score for a mortgage

A lot of customers come to checkmyfile because they plan on applying for a mortgage – your Credit Report is, after all, the best place to start as it’s helpful on more than one occasion. But often the question is often raised: "what Credit Score will I need to get a mortgage for my dream home?”

Published on 8 Aug 2018 by Jamie Mackenzie Smith

Full Article

Last minute mortgage checks

When could a non-bankrupt person be considered bankrupt? When they’re buying a house.

Published on 17 Jan 2018 by Richard Catlin

Full Article

Guarantor loans can affect mortgage applications, lenders warn

Guarantor lenders are always keen to point out that you don’t need a credit check to take out one of their loans, just a friend or family member who has a good credit history that is able to act as a guarantor. For those with a poor credit rating, this type of loan provides a solution to a problem – they can afford the loan repayments but are unable to get credit due to prior adverse credit history.

Published on 9 Jan 2018 by Kelly Luff

Full Article

Homeownership among 25 year olds halved in 20 years

Homeownership among 25 year olds has more than halved in the last 20 years, according to a survey conducted for the Local Government Association (LGA). The study carried out by Savilles the estate agents found that only 20% of 25 year olds now own a home of their own, compared to 46% in 1996.

Published on 5 Jan 2017 by Erika Bone

Full Article


We are rated number 1 for customer service on