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Lenders and brokers ‘too quiet’ over PRA Buy to Let changes

Mortgage lenders and brokers have been too quiet over the Prudential Regulatory Authority’s (PRA) changes to buy to let lending, according to the National Landlords Association (NLA).

The NLA says that despite the significant regulatory changes to lending criteria and the application process for portfolio landlords, introduced by the PRA over the last 18 months, more than half 55% were still unaware.

The findings, from the NLA’s Quarterly Landlord Panel, shows that just 8% of landlords said their lender had been in touch about the changes, with 16% saying they had been contacted by their broker.

Almost seven in 10 landlords 68% said neither their lender nor broker had made contact with them about the changes. However, the findings show that brokers and lenders may have concentrated their efforts on larger portfolio landlords, with 26% of portfolio landlords saying their broker had been in touch, and nine per cent saying their lender had made contact.

Richard Lambert, CEO at the NLA said:

“The PRA’s changes will greatly affect the ability of landlords to find new finance and continue to provide good quality affordable housing to those who need it”.

The NLA says that it’s vital landlords are supported through the changes, having issued broad advice earlier in the year urging landlords to contact their mortgage broker or bank before committing to any new property or finance.

“We hope that that the reason such a significant number of landlords haven’t been contacted is because their existing deals are simply not yet close to expiry. However, it’s in lenders’ and brokers’ own interests to speak to landlords about the changes sooner rather than later, otherwise it could mean a missed opportunity in terms of new business.

“If landlords don’t get the right support and information about how the changes will impact their existing loans, then it could mean higher finance costs that many just won’t be able to absorb”.

Source: Property118

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Stuart Marshall: buy-to-let changes may mean more expats doing buy-to-let

The reduction in buy-to-let mortgage tax relief may cause more people to emigrate abroad and invest in UK buy-to-let from overseas, the managing director of Liquid Expat says.

Stuart Marshall is the managing director of Expat Packager, which submits UK buy-to-let cases for expats, and Liquid Expat Mortgages, which offers buy-to-let mortgages for expats.

Marshall said: “Lenders not already operating in the expat marketplace will have to start thinking about tapping into it because of more people leaving and becoming expats.

“With Brexit, a lot of the talent pool will leave and this is good for our business. People are realising there’s a big world out there and can experience more cultures and not living in the UK, paying UK taxes.

“If you’re an expat there’s genuinely never been a better time to take out mortgage finance. A lot of the specialist lenders have been looking for new niches.”

The mortgage tax relief changes, phased in over four years, mean 75% of finance costs are deductible from rental income from 2017 to 2018. The year after it will be 50%, the year after that 25% and from 2020 none.

Marshall added: “Some landlords may be selling off some units in the UK because of being hit harder with tax changes.

“We’ve seen more expats wanting to buy into a limited company to do buy-to-let deals but we’ve been educating them, showing a lot of the time, it’s not worth the time and the cost to set up.

“Expats can earn a certain amount in the UK before paying tax and property purchasing may not take them over that amount, meaning they wouldn’t be affected by these tax changes.”

Landlords have had to pay 3% more stamp duty since April 2016, something which Marshall found positive for expats.

He said: “It hasn’t had a negative impact on the number of mortgage applications from overseas landlords. It just means they are looking at more efficient properties and doing due diligence on them with the cost involved and rental yield.”

The Prudential Regulation Authority brought in regulation from 2017, requiring applicants with four or more mortgaged buy-to-lets to provide more information about their existing portfolio.

Marshall said: “There won’t be much change because in the expat marketplace lenders are more cautious, always looking at affordability and there’s more underwriting too.”

He said that it’s this manual underwriting that makes the process take longer. “Getting tested and certified passport copies is the most difficult because a British embassy may be far away and there may be a long wait.”

Marshall reckoned that with technological improvements, the process will quicken eventually.

He said: “It will do but will take one major player with a lot more digitally driven processes and once established, lenders will have to follow suit.

“Marsden is the first lender we have trialled doing these passport checks digitally and achieved a 100% success rate, meaning they all worked digitally without needing having to go to an embassy.”

He felt the expat marketplace for lenders is as competitive as ever and new entrants must add something new.

He added: “There is space for new entrants if they have a clear criteria and rate that fills the gap existing lenders are not covering.

“We aim to continue to bring new lending products expats can benefit from, make application process smoother and educate all the expats that see getting a mortgage in the UK as a problem.”

Source: Mortgage Introducer