Buy to let

Buy-to-let landlords should face new limits on the amount they can borrow, the Bank of England has proposed.

It suggested that lenders should be much stricter when deciding whether or not to grant landlords a mortgage.

Instead of just taking their rental income into account, the Bank wants lenders to look at their wider financial situation as well.

If adopted, the new rules could reduce lending to landlords by up to 20% over the next three years.

The Prudential Regulation Authority (PRA) – an arm of the Bank – has recommended that banks and building societies take account of:

• all the costs a landlord might have to pay when renting out a property
• any tax liability associated with the property
• a landlord’s personal tax liabilities, “essential expenditure” and living costs.
• a landlord’s additional income – where this is being used to support the borrowing. This income should be “verified”.

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This post was written by Debbie Brown