BTL approvals to be cut by 20% under new proposals

BTL approvals to be cut by 20% under new proposals

According to new PRA proposals published today, landlords with four or more properties in their portfolio should be subject to tougher underwriting standards, leading "to a decrease in the number of cumulative new approvals for buy-to-let mortgages by about 10-20% by Q3 2018".

The PRA review highlighted concerns about lenders’ growth plans and how they might meet them, finding that firms are "affecting their safety" by having relaxed underwriting standards.

To prevent a "marked loosening in buy-to-let underwriting standards and to curtail inappropriate lending and the potential for excessive credit losses", the PRA has proposed new rules and has suggested that lenders should pay attention to:

    Market expectations
    A minimum increase of 2% in buy-to-let mortgage interest rates
    Any Financial Policy Committee announcements around appropriate interest rate stress tests for buy-to-let

The report added that lenders should assume a minimum borrower interest rate of 5.5%, saying: “The proposals on affordability testing aim to improve the safety and soundness of PRA regulated firms by ensuring that they take full account of any potential interest rate rises in their buy-to-let underwriting assessment.

This will help curtail inappropriately risky and imprudent lending – loans that are affordable under the current low interest rates environment but will quickly become unaffordable if and when interest rates rise – and lower potential credit losses and repossession costs.

As a result, these proposals are also expected to help insulate the lenders, the financial sector and wider economy from the impact of negative shocks in the housing market.”


The PRA is also seeking to establish a standard definition of what constitutes a ‘Portfolio landlord’. Under this proposal, a landlord would be considered to be a Portfolio landlord where they have four or more mortgaged buy-to-let properties across all lenders in aggregate. Data gathered by the PRA shows that there is an increase in observed arrears rates of landlords with buy-to-let portfolios of four or more mortgaged properties.

The PRA is expecting that firms conducting lending to Portfolio landlords do so according to a specialist underwriting process that accounts for the complex nature of the borrower and their portfolio of properties.

As affordability constrains the value of the loan a firm can extend, the PRA is not proposing supervisory guidance with respect to specific LTV standards.

However, the PRA does expect firms to have "appropriate controls in place" to monitor, manage and mitigate the risks of higher LTV lending.

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ChristinaReedUK
ChristinaReedUK 20 Jun 2016

I don't understand why it's always a war between the two sides. Either, way the landlord is probably keeping a detailed inventory and will see the changes you've made. I just don't understand why there...

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NathanGreen
NathanGreen 16 Jun 2016

Seeing that the tenants are quite satisfied with their landlords and the properties is indeed great. I wonder, though, what is the situation in London alone? The tenants face sky-high rent levels in the...

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AndiMur
AndiMur 15 Jun 2016

TheGuardian published the same forecast. But on the other hand, professional brokers express different opinions. According totranio.com, an exit from the EU would not affect the demand/supply imbalance...

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Gary Holmes
Gary Holmes 14 Jun 2016

Having a professionally completed inventory at check-in and check-out is clearly (to me at least) of minor value. Tenants make un-authorised modifications and/or walk off with items that belong to the

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Violet Gibson
Violet Gibson 14 Jun 2016

Cautious people think buying off-plan is reckless, but over the past few years investors have literally made fortunes.Pre-release prices have obvious benefits for the developer, who gets instant finance...

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Kate Windleton
Kate Windleton 14 Jun 2016

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NathanGreen
NathanGreen 14 Jun 2016

I think it all depends on the market conditions and how well your company is doing. You will agree that you can't demand more when you're killing yourself just to hang in there. Sometimes you need all

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ChristinaReedUK
ChristinaReedUK 13 Jun 2016

What does "detecting a bad vibe" mean actually. I've had certain vibes like these and yet have always found a reason , if there's any, why I don't like a certain property. The property maintenance might...

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keybanks estates
keybanks estates 08 Jun 2016

Great News for first time buyers, about time two!

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NathanGreen 07 Jun 2016

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NathanGreen
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Paul 25 May 2016

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