Portfolio lenders
With the new PRA rules for portfolio landlords coming soon, many portfolio lenders have shared their positions. The PRA’s unclear guidelines have caused lenders to interpret them differently. This has led to major differences in the requirements for portfolio landlords (those with four or more properties) and their brokers.
To simplify this complex landscape, Connect for Intermediaries has compiled a comprehensive table to assist brokers in understanding and meeting the diverse requirements of different lenders.
Given the impending changes, clients requiring remortgages should expedite the process before the September 30 deadline, thus avoiding the additional documentation that lenders will soon demand.
Most lenders are willing to extend mortgages to portfolio landlords. However, Santander exclusively accepts remortgages. Mortgage Trust redirects landlords with four or more properties to their Paragon brand. BM Solutions now restricts background portfolios to ten properties, altering their previous unlimited portfolio stance.
The PRA’s supervisory statement outlines measures for lenders due to the complexity of portfolio lending. Factors include aggregate debt, diverse cash flows, and risks related to property and geographical concentrations. Despite the PRA offering examples of considerations that lead to diverse requirements, interpretations among lenders vary.
Aldermore, Castle Trust, Interbay, and Kent Reliance require a business plan from portfolio lenders. Aldermore, Interbay, Kent Reliance, and Leeds also require a cash flow prediction.
Most portfolio lenders demand an asset and liability statement or a portfolio spreadsheet. Brokers must address additional requirements, including stress testing of the existing portfolio.
Skipton stresses the existing portfolio based on rental income at 150% of notional mortgage payments calculated at 5.5%. Kent Reliance adopts 125% of 5%.
This diversity in stress testing approaches highlights the importance of brokers staying abreast of criteria. Collaboration with experts in the field may also be necessary.
In light of evolving regulations, brokers’ understanding of diverse criteria will determine clients’ mortgage approval. Securing a mortgage after October 1 may present challenges.