Buy To Let mortgages could require a 50% deposit in the future

by Jason McClean

11:25 AM, 8th December 2015
About 3 years ago

Buy To Let mortgages could require a 50% deposit in the future

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Buy To Let mortgages could require a 50% deposit in the future

Experts have predicted that the buy to let market is moving towards a situation where only those with a 50% deposit are likely to qualify for a mortgage.deposit

Lenders are tightening their criteria for new applicants and Barclays has cut buy to let lending.

The link between rental income and monthly mortgage cost is being altered by a number of lenders with landlords either having to increase the rents they charge tenants or borrow less money.

The lender previously required landlords to have a rental income of 125% of the monthly interest, calculated at a mortgage rate of 5.79%, however this has increased to 135% at 5.79%.

Barclays is one of the first lenders to take action just as the Bank of England’s Financial Policy Committee (FPC) has identified the buy to let sector as one of the main risks to financial stability.

BM Solutions, the biggest buy to let lender has also tightened its criteria with investors now needing a monthly rental income of 125% of the mortgage at a rate of 5.49%, while borrowers with bigger deposits have a rate of just 4.99%.

A spokesperson for Discount Landlord said: “In order to match the monthly rental income levels that lenders are now beginning to set as criteria for qualifying for a loan, landlords may be inclined to push up rents.”

“With investors not able to borrow large amounts unless they have large deposits, landlords need to protect their rental income more than ever and ensure that void periods are covered with specialist Rent Guarantee and Legal Expenses insurance.”

It is expected that the Treasury will launch a consultation to giving the FPC additional powers which could include imposing further lending caps and strict new affordability requirements for borrowers.

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Comments

money manager

16:18 PM, 8th December 2015
About 3 years ago

Factory owner to friend " My factory burned down". Oh, says the friend "When was that?", "Next week" was the reply.

The Governor of The Bank of England may have identified he BTL sector as a threat to financial staability but the subsequent actions of he and the Chancellor are akin to an arsonist setting about their own property.

Karen Archer

23:30 PM, 8th December 2015
About 3 years ago

On what basis has the Governor of the Bank of England come to the conclusion that the BTL sector is a risk to the financial stability? Why on earth are BTL landlords such a high risk? Most BTL landlords put their money into property to gain the rewards of a monthly income and an increase in property sale value. If any property is repossed you can put money on it that the institution backing the mortgage never loses out so why the need to increase the deposits?. It seems to me the government are hell bent on getting rid of the private sector altogether.

Gary Dully

0:42 AM, 9th December 2015
About 3 years ago

Reply to the comment left by "money manager" at "08/12/2015 - 16:18":

Mark Carney is from Canada,

He has to say something each month, as people in the press chairs are now asking, "just whats so special about the guy?",
"Why was he imported in?" -

He still has his own hair, as we rip all ours out.
He still has his own teeth, as we remove our gold and silver fillings.

As they said in Monty Pythons "The Life of Brian" - "What have the Canadians ever done for us?"

He may as well say that George Osborne is a threat to financial stability, because he bloody well has been to my financial stability in the last 7 months.

So that means he must be a threat to 1m + Landlords and a good few million tenants at the moment.

"Always Look on The Bright Side of Life"

I'm hoping a lorry overturns on the Motorway and wipes out Osborne and Camerons Xmas Turkey's!

James dengel

10:54 AM, 9th December 2015
About 3 years ago

Reply to the comment left by "Karen Archer" at "08/12/2015 - 23:30":

Karen, the huge risk is that many unaware landlords risk having huge tax bills because of Clause 24.

Hence they need to make sure that the rent covers the mortgage plus 20% for the tax.

Thank god that they thought about the stability of the BTL market before they went and added huge amounts of tax for having a buy to let.


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