Foundation Home Loans Finds Landlords Pessimistic About PRA Changes

The introduction of new PRA changes has lead to three quarters of portfolio landlords struggling to secure a mortgage, according to figures from Foundation Home Loans, as based on research from BDRC Continental.

70 per cent of UK landlords, when asked how they had been affected by the PRA regulatory changes, said that they had found obtaining finance a challenge since the regulations became effective on the 30th September 2017. 51 per cent of those owning between one and three buy to let mortgages felt similarly, with all feedback based on information from landlords who have applied for a mortgage since the changes came into effect.

The Prudential Regulation Authority (PRA) regulation requires lenders to introduce changes to the way in which buy to let mortgage applications are underwritten for portfolio landlords. Borrowers who own four or more mortgaged properties are classed as portfolio landlords and subject to the new standards. These include the requirement to submit a forward-looking business plan.

As a result of this, 48 per cent of landlords who are aware of the PRA changes feel that they will slow down the process of securing a mortgage. Two thirds of those who own 11 or more properties also believe that the range of mortgage products available to them will be reduced. Finally, a further 28 per cent believe that the changes will render it more likely for their mortgage application to be rejected.

Marketing Director of Foundation Home Loans, Jeff Knight, said: ‘Whether these figures are to do with a natural period of adjustment or become the new norm remains to be seen. Nonetheless, in order to make this as smooth a transition as possible, brokers and lenders must work together to ensure things do not become unnecessarily challenging. Our research last year proved that, at the end of the day, brokers and landlords are after pragmatic and straight forward processes. Considering the significant take-up from this group, we devised a proposition to make application as simple as possible – for example, with no need for evidence of a business plan.’

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