Portfolio landlords finding it harder to secure mortgage finance post PRA

23 January 2018

23 January 2018 – Nearly three quarters of portfolio landlords have found it more difficult to secure a mortgage since the PRA changes were introduced, according to figures from Foundation Home Loans, based on research by BDRC Continental.

When asked how they had been affected by the PRA regulatory changes, 70% of UK landlords with over four buy-to-let mortgages said they had found obtaining finance a challenge since the regulation came into effect on 30th September 2017. Half (51%) owning between one and three buy to let mortgages felt the same (all figures are based on feedback from landlords that have applied for a mortgage/remortgage since the changes came into effect).

The Prudential Regulation Authority (PRA) regulation means lenders must introduce changes to the way in which buy to let mortgage applications are underwritten for portfolio landlords. Borrowers with four or more mortgaged properties will be classified as portfolio landlords and subject to the new standards, such as a requirement to submit a forward-looking business plan. As a result, almost half (48%) of landlords aware of the PRA changes think they will slow down the process of securing a mortgage, with two thirds of those who own 11 or more properties believing the range of mortgage products available to them will be reduced. Furthermore, 28% believe the changes will make it more likely for their mortgage application to be rejected.

Jeff Knight, Marketing Director, Foundation Home Loans, said: “Whether these figures are to do with a natural period of adjustment or become the new norm remains to be seen. Nonetheless, in order to make this as smooth a transition as possible, brokers and lenders must work together to ensure things do not become unnecessarily challenging. Our research last year proved that, at the end of the day, brokers and landlords are after pragmatic and straight forward processes. Considering the significant take-up from this group, we devised a proposition to make application as simple as possible – for example, with no need for evidence of a business plan.”

Foundation Home Loans works exclusively through intermediaries, with products designed for clients with more complex needs. It has recently launched its residential product range in addition to its established buy-to-let proposition.