Navigating New PRA Rules for Portfolio Landlords
With new PRA rules for portfolio landlords approaching, many lenders have disclosed their varying interpretations. These interpretations have led to significant differences in requirements for portfolio landlords and their brokers. The PRA defines portfolio landlords as those owning four or more properties, but its vague guidance has resulted in inconsistent approaches across lenders.
To clarify these complexities, Connect for Intermediaries has created a comprehensive guide. This table aims to help brokers understand and comply with the diverse requirements set by lenders. Transitioning into this new regulatory landscape requires careful preparation and awareness of the changes ahead.
Why Act Before the Deadline?
Clients seeking remortgages are encouraged to act swiftly. Completing applications before 30 September helps avoid additional documentation that lenders will soon require. Acting early minimises potential delays and ensures smoother transitions into the new framework.
Lenders’ Approaches to Portfolio Landlords
Encouragingly, most lenders are open to portfolio landlord applications. However, there are notable exceptions. Santander, for instance, only accepts remortgages, while Mortgage Trust redirects landlords with four or more properties to its Paragon brand. BM Solutions has shifted from allowing unlimited portfolios to capping background properties at ten.
The PRA’s supervisory statement highlights the complexity of lending to portfolio landlords. This includes factors like total debt, diverse income streams, and property risk concentrations. Although the PRA offers examples, lenders interpret the rules differently, resulting in varied requirements.
For example, Aldermore, Castle Trust, Interbay, and Kent Reliance require business plans. However, only Aldermore, Interbay, Kent Reliance, and Leeds request cash flow predictions. Most lenders also require an asset and liability statement or a portfolio spreadsheet.
The Role of Stress Testing
Stress testing has become a key component of the new rules. Skipton stresses portfolios at 150% of notional mortgage payments calculated at 5.5% rental income. Meanwhile, Kent Reliance uses a more lenient 125% of 5%. These differences in criteria make it vital for brokers to stay informed or work with experienced professionals.
Brokers’ Role in Ensuring Compliance
In this evolving regulatory environment, brokers must adapt to diverse lender requirements. A clear understanding of the criteria will be crucial for securing mortgages for clients after October. Staying updated and leveraging expert guidance can help brokers navigate these challenges effectively.
Thank you for reading our publication “Portfolio Lenders | The Key Changes For Landlords Uncovered.” Stay “Connect“-ed for more updates soon!
