Is your buy to let dream over
What will happen with buy to let properties?
We constantly see in the news about the rich poor devide. Has it now reached the buy to let industry. It seems that new rules for being accepted for a buy to let mortgage are going to exculde all but the wealthiest landlords
Looking at the many emails I receive it seems investing in buy-to-let property is on the verge of becoming unaffordable for many savers as stricter lending rules mean they will soon need at least a 40% deposit to qualify for a mortgage. With new lending criteria set to be introduced by the Bank of England potentially as early as Autumn 2016. If this comes into effect it will remove a large segment of investors from being able to purchase buy to let properties. Will this have the effect of reducing supply in an already oversubscribed market thus pushing rents up even further?
Under the proposed system borrowers are likely to have to find nearly twice as much money for a down payment on a property than at present. At present around half of buy-to-let mortgages require a 25% deposit.
From talking to a couple of lenders, the middle class have provided the recent buy to let boom, providing much needed rental properties for those that currently cannot get on the property ladder. If these landlords are removed from the property market what will happen to the supply of properties or will the rich just get richer?
The Bank of England is citing this action to force lenders to toughen up their lending criteria over concerns that they have recently relaxed the criteria for landlords and they fear they are creating another 2008 credit crunch, with landlords over lending on properties.
The nationwide as already taken a step towards the proposed new criteria, this means a landlord buying an average house would now need to find £83,349 deposit.
In London the average property stands at £500,000 how many landlords have the 40% deposit needed? Are we just encouraging further investment from overseas? Is that the real driver for this change?
This is the latest move to try and cool the buy to let market or are the government just moving the goal posts so the average investor will no longer be able to invest in the buy to let market. With increased stamp duty and the reduction in tax relief on buy-to-let mortgage interest payments from April 2017. You do wonder what the real motives of our government are in this matter. It is not as if they are building thousands of much needed homes!