In June the bank of England released recommendations to the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) regarding loan to income ratios for mortgages
“The PRA and the FCA should ensure that mortgage lenders do not extend more than 15% of their total number of new residential mortgages at loan to income ratios at or greater than 4.5. This recommendation applies to all lenders which extend residential mortgage lending in excess of £100 million per annum. The recommendation should be implemented as soon as is practicable.”
A consultation paper has been published by the the PRA Board which sets out proposals on how this recommendation will be implemented, the final rules are due to come into effect on the first of October 2014.
Seen as a potential cooling measure for the UK property market will this change have the desired affect? The first point to consider is that these measures refer to residential mortgages and the understanding is that this will not be imposed on buy to let mortgages which reported to be the fastest type of mortgage in the UK . This will not affect therefore those looking to buy an investment property and with the number of those looking to supplement income by buying an investment property increasing perhaps this will not have the desired impact.
So what of those looking at buy to let to supplement income , The National Landlords Association ( NLA ) refers to these property investors as part time landlords as they are not solely dependent on the properties for income . They advise that these property purchasers equate to ” more than 70 per cent of the sector.” and also report ” that a fifth of these landlords are so encouraged by the current rental market that they intend to add to their property portfolio this year”. Their chairman has confirmed this advising ” “Private landlords put an estimated £20bn into providing homes the UK and we know that more and more people are looking to buy-to-let as an alternative means of saving for the future ”
In the recent financial crisis landlords were not unaffected and many had properties taken by the banks . It is important to note the threat of rising interest rates as one of the points when considering buying an investment property. Other factors such as location , property management , demand generators and target audience of tenants should also be considered . Investment Property consults has considerable experience in the buy to let market and can assist in identifying excellent opportunities for those investing in property.