The Mortgage Market Review (MMR) is due to kick-in tomorrow – on Saturday the 26th of April. Its implementation may slow down lending in the short term, as lenders come to terms with the new rules, but perversely this could boost lending in the buy-to-let market as lenders try to meet their overall lending targets.
Buy-to-let mortgages are unregulated, unlike owner occupier mortgages, and it is thought the new rules will have a much less significant effect on the buy to let sector.
This may not be the case for all lenders as some will inevitably apply the more rigorous standards across the board.
While the slowdown in owner occupier mortgages is unlikely to be more than short-term it could damage confidence at a time when the housing market has just started to take off.
It is thought that Buy-to-let being unregulated will be a prime target to have its tap turned on full. Some broker firms are looking at doubling their buy-to-let business this year.
There will still be tough requirements for buy-to-let from most brokers: some will want to assess the buy-to-let investor’s minimum income, which will mean evidence of salary and copies of recent bank statements. The self-employed will usually be asked for a copy of their self-assessment tax calculation (SA302) from HM Revenue and Customs.
There could also be some criteria changes, especially for those landlords with large portfolios as lenders typically limit the number of properties they can have with one lender.
Lenders are also concerned that some owner occupiers with low earnings will try to obtain a buy-to-let mortgage (because of the less stringent earnings requirements) for a property they intend to live in.
This means that in some cases genuine Buy-to-Let investment buyers may have to undergo more stringent checks than they are used to.
With this boost to lending, it is thought by some in the industry that the buy-to-let market could be around £25bn this year, a 10-15% increase over 2013.