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If the PRA (Prudential Regulation Authority) is not on your landlord radar, it should be!It is set to be implemented on 1st January 2017 and may significantly impact the amount of money you can borrow. Criteria will be stricter, LTV's lower, and stress tests higher!I caught up with Emma Cox, Sales Director at Shawbrook Bank, to gain some further insights:
Implementation in part by 1 Jan 2017 and in full by 30 Sep 2017.
Here is the Document in full
and the associated Policy statement
The correct deal stacking calculation is now:Monthly rent x 12 divided by 5.5% divided by 145%This will show you how much borrowing the rent will support.For further insights, here is a round up of Property Tribes content on this topic:PRA issues BTL underwriting expectations Tick! Tock! The countdown to PRA has started!PRA on steroids coming soon PRA & Remortgages LTV's to decrease through higher stress testsIf you are intending to buy, or expand your portfolio, in 2017, it is vital that you take action now to ensure that you meet the new stricter lending criteria. The era of the highly leveraged landlord is well and truly over.Property Tribes Financial Services are here to support the PT community through the changes, and can be contacted on 01206 654444.SEE ALSO - Calculation to stack dealsUP NEXT - Section 24 - landlords must take action nowDON'T MISS - Changing landlord dynamics & rent risesNOW WATCH:
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
I’ve had four telephone conversations today which should have shocked me.
Four conversations that should have been extraordinary but have been unremarkable.
So what have we been talking about?
“PRA? What’s that about”?
“Tax changes? What Tax changes”?
Here we are in November 2016 and with new legislation, new policies and new rules to commence in January 2017 there are still people that don’t know what’s going on!
Clearly the reason is obvious. The people that don’t know about these things are
Actually these people were
Exactly! These people aren’t stupid at all. These are normally very astute, very clever, switched on and intelligent people.
They do however share something else. They all have one common denominator. An ability to think that what’s going on “doesn’t and won’t really affect them”. Yes they’ve probably heard mention of these things and read articles in newspapers and forums but these are the people “that have had property for years” “nothing’s changed since we bought our first property” “this is all about the landlords with 100`s of properties”…………………..”ISNT IT”?
NO. IT ISNT!!!
THE REAL RISK? THE REAL RISK IS DOING NOTHING
There is still time so email me, pick up the phone and do it.
Mr Mark Alefounder
Mortgage & Protection Broker
Optimum Independent Financial Advisers
Mobile 07716 647 928
Tel: 01206 366700
The financial regulator, the ‘Financial Conduct Authority’ designates that there are two different types of financial advisers, ‘independent’ and ‘restricted’. The status of an adviser firm will affect the type of advice that is given. A restricted adviser firm can only recommend certain products or product providers, whereas an independent adviser firm, such as Optimum, is able to consider and recommend all types of retail investment products and/or providers that could best meet clients needs and objectives. Optimum Independent Financial Advisers offers genuine unbiased and unrestricted advice.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Optimum Independent Financial Advisers is authorised and regulated by the Financial Conduct Authority
Financial Services Register Firm Reference Number (FRN): 223293
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The lack of knowledge is staggering I come across it day after day
But the reason is they have other jobs and lives outside of BTL
but it is this section of employed Landlords who will be hit hard with S24
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
We are immersed in it day by day so we live sleep and breathe it
Despite the internet and social media sadly many people will never be aware until it directly affects them
Their plan will come when they get refused a mortgage or an inflated tax bill drops on their mat.
In April 2011 the HB regs were amended so I could get LHA paid direct. I was on it day 1 as for me it was massive
I had to tell my council about it though. Even though it was their job to implement and deliver it but they were not aware of it
They amended their forms as a result of my intervention
But now over 5 years later I still meet LHA landlords clueless about that important amendment
So however much we beat the drum some landlords will simply not realise the impact of all this new stuff until 2021 if at all
As you say they have day jobs and other lives far far away from BTL
Jonathan Clarke. http://www.buytoletmk.com
I bet Doctors cannot believe how many many astute clever switched on intelligent people do not know how to perform CPR
That is comparatively far more important as it could save loved ones lives and still people don`t take time out to get up to speed on it
I fear that PRA awareness and sec 24 are destined to remain relatively unknown and in the shadows for years to come.
Your task to highlight it to people has only just begun. Look on the bright side though - You have a job for life!
A quote from Aristotle Onnaiss
The secret of a good deal in business is when you know something others don't ???
I am writing to echo the comments above insofar as I have had a hectic week visiting our existing Clients simply to provide an update and insight in to the forthcoming, and already in situ, changes that impact on the everyday BTL'er.
One of my long standing Clients is a hugely successful businessman and over the past 10 years years we have also advised him on the various funding strategies for his BTL and commercial property portfolio (8 properties) too. He told me this week that he has seen "something in the headlines, but not really read it in detail" The "something"? The tax changes, the stamp duty changes, the PRA intervention, the limits on affordability, the ........ well, basically, anything and everything. And, as has been alluded to above, this is not uncommon. This post is not a criticism, it is an observation from someone who is immersed in BTL from both a Broker and also a landlords perspective.
Already a few lenders have now implemented the changes to how much someone can borrow on a BTL basis, now based on the borrowers specific tax brackets and revised rental income calculator stress tests. Some positive tweaks are that end ages have been extended, quirky property types are being allowed where not before and other various criteria which are property, borrower and credit specific, as well.
But - and this is the question which every existing and new BTL borrower should ask themselves - do you know enough about the new regime, in order to make a properly deliberated decision as to how to proceed with your new financial plans and requirements?
Judging by the massive feedback from our Client meetings and discussions, not many people know sufficient data at this time.
Property Tribes Financial Services started 2016 by offering a portfolio review and many people took advantage of this.
2017 surely has to be an even more serious understanding of 'where you are and where you want to be, and crucially, how to get there in the most efficient and profitable way'.
On that basis, anyone who would like to be updated and find out the most appropriate options for their current and future planning, should seek specialist advice assistance.
For tax advice, PT recommend https://www.Rita4Rent.com
For legal advice https://anthonygold.co.uk/people/david-smith
For mortgages (BTL, bridging, commercial, development, international/expat, secured loans) and also all landlord life cover too, 2017planning@PTFS.co.uk
As my successful businessman Client (as above) said to me this week "I have had my head in the sand for too long. I need your advice and my accountants advice and I value your support" This says it all, too many people have not confronted head on what they need to do, simply because many people don't know what they need to know.
Email us at 2017planning@PTFS.co.uk with your current situation and possible requirements and our Team of Advisers will be pleased to assist.
FOR INDEPENDENT MORTGAGE AND INSURANCE ADVICE
PROPERTY TRIBES FINANCIAL SERVICES
CONTACT US FOR LIFE INSURANCE QUOTES AND STRATEGIES. PORTFOLIO MORTGAGES (VARYING TERMS) COVERED
Related content:Bank of England "stress test" results
Specialist mortgage lender OneSavings Bank is the latest to announce that it is introducing stricter affordability assessments for all new buy to let mortgage applications.
From December 28 OSB, through its trading brands of Kent Reliance and its subsidiaries InterBay Commercial and Prestige Finance, is falling in line with many other lenders and with the guidelines advised by the Bank of England’s Prudential Regulation Authority in its bid to control excessive buy to let lending.
OSB says that from next week the minimum stress rate applicable for rental cover purposes will be 5.5 per cent or the initial pay rate plus 1.55 per cent, whichever is higher.
OSB has also extended its definition of ‘standard property’ to include HMO/multi/student lets up to five rooms, or blocks of flats with up to four units, as well as single dwellings.
84% of brokers were unable to source a buy-to-let mortgage for some of their clients in Q4 of last year, with over a quarter (27%) attributing affordability as the main barrier, according to the latest MTF data.
20% of the brokers surveyed said they were unable to get buy-to-let mortgages for clients with adverse credit and equally, while 20% blamed consumer buy-to-let regulations.
69% of brokers said they opted for bridging finance after being unable to raise a buy-to-let mortgage for their clients in instances where time is of the essence. Full/source story
I wonder how that will look for Q1 17 with the PRA first stage implementation from 1 Jan?