Last year, the Prudential Regulation Authority – part of the Bank of England, began its crackdown on buy-to-let mortgages but there are now signs that lenders are relaxing their rules to woo landlords. 11 months ago, lenders were told to tighten up on who they give buy-to-let mortgages to which led to a widespread hike in the amount of rent lenders wanted to cover monthly mortgage payments to 145 per cent.
The regulator warned the amount of rent required to cover mortgage payments and other running costs might have to rise and it imposed a new ‘stress test’, requiring landlords to be able to show they would be able to afford to cover the mortgage if interest rates went up to 5.5 per cent over five years.
Nearly all buy-to-let lenders had a knee-jerk reaction, hiking their mortgage interest coverage ratios to a flat 145 per cent. However, a number of smaller lenders have recently dropped their rental income minimums back down to 125 per cent – the standard rate before the hike.
Subsequently, investors can take advantage of this change in lending rules by choosing the right mortgage. Landbay which is better known as a peer-to-peer investment platform is now offering a five-year fixed rate mortgage to buy-to-let investors with a 40 per cent deposit at a rate of 3.75 per cent. Therefore, you can make your buy-to-let mortgage more affordable by locking into a five-year fixed rate deal as the rental income is only subject to the ‘stress test’ if the mortgage deal is less than five years.
With a little bit of work, a Buy-To-Let investment is well worth it. Overall, the UK’s Buy-To-Let market is worth nearly £1 trillion with over 1.75 million private landlords (The Guardian, 2016) currently investing in property.
Edifice Invest has a range of properties available and we work closely with investors to ensure that Buy-To-Let is right for them. For those seeking a ‘hands off’ investment, Edifice Invest can deal with the developer and property management company to ensure your property is let to suitable tenants.
Plus, all of our property investments are available off plan with a discount of up to 15 per cent so you can buy it, let it and then forget it. To discuss the latest opportunities with one of our advisors, fill out our contact form below and we will be in touch.