Yesterday the Prudential Regulation Authority recommended for buy-to-let lenders to stress test loans for five years with a rise of at least 2% or against a rate of 5.5%.
The Residential Landlords Association has branded the government’s latest measures to curb buy-to-let as “premature”.
Yesterday the Prudential Regulation Authority recommended for buy-to-let lenders to stress test loans for five years with a rise of at least 2% or against a rate of 5.5%.
The government has already introduced a 3% stamp duty surcharge coming in from 1 April and is cutting the amount of mortgage tax relief landlords can claim from 45% to 20% between 2017 and 2020.
David Smith, RLA’s policy director, said: “The bank needs to be careful that it does not over-react to the current surge in buy-to-let applications which are aiming to beat the tax increases coming in April.
“These include a three percentage points extra levy on stamp duty and abolition of mortgage interest relief. It is likely that the impact of these will significantly reduce the demand for borrowing.
“We would urge the Bank to tread carefully and avoid any premature moves that could stifle the supply of the one million rental properties the country desperately needs.”
The PRA accused the market of being sensitive to interest rate rises due to the number of short-term interest-only loans in the sector.
The body also said its actions will result in approvals being 10-20% lower than it if hadn’t got involved by the third quarter of 2018.
David Cox, managing director of the Association of Residential Letting Agents, said: “The PRA’s move yesterday to introduce stricter affordability measures for buy-to-let investors is frankly disappointing. Whilst we recognise the need to look at the important issue of affordability, the proposed measures are far too tough and are yet another assault on the rental market.
“Something urgently needs to be done to make the prospect of being a buy-to-let landlord appealing again, or the vicious cycle of supply and demand is only going to get worse and worse.”
