PRA buy-to-let stress tests could spark another rush

The Prudential Regulation Authority’s buy-to-let measures could spark another rush of landlords looking to buy before it gets involved, Fleet Mortgages chief executive Bob Young has predicted.

In March the PRA proposed stress testing buy-to-let loans over a period of five years or against a rate of at least 5.5% – and the measures could be introduced as early as January 2017.

The first quarter of the year was extremely busy as landlords looked to buy before the 3% stamp duty surcharge came into force on 1 April.

Bob Young, chief executive of Fleet Mortgages, said: “The recent PRA consultation on buy-to-let underwriting actually makes it more likely that we will see activity levels begin to increase again over the course of the year as we get closer to the implementation of the rules.

“Certainly, given their intention to drive down the amounts buy-to-let landlords can borrow, it would be logical to think existing landlords seeking to remortgage or capital raise or both, will make the most of the current market conditions which will allow them to borrow at higher levels.

“Once the new rules kick-in, landlords and their advisers may well find their ability to secure the money they want has been compromised by the stricter underwriting criteria imposed on lenders, plus of course the likelihood that increased capital requirements will also impact on lender’s ability to offer the same levels of funding.”

Fleet expected portfolio landlords, defined as those who own four or more properties, to lead the way in securing mortgage finance in 2016 instead of waiting until next year.

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