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Analysis: PRA rules ‘may hike broker fees and delay approvals’

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Broker fees could increase in the near future to reflect the increased workload and administrative burden many face as a result of the new PRA buy-to-let lending guidelines.

There are also concerns that these new rules could create delays in the processing and approval of specialist BTL loans.

The PRA guidelines, introduced just over a month ago, require lenders to apply specialist underwriting and tougher affordability assessments to landlords with four or more properties.

BTL brokers and specialist lenders says they are already feeling the effects of this new regime. Brokers say the most immediate change has been an “exponential increase” in the paperwork and administration needed.

The Buy To Let Business managing director Ying Tan says: “The biggest impact has been the increased workload, for both brokers and their clients.”

Tan says brokers are now required to pass on detailed business plans, and asset and liability calculations, for portfolio landlords. He adds that it is “almost inevitable” that this will lead to delays in approving mortgages for these clients.

“Given it takes around four to five weeks to process a mortgage application, we are not seeing delays to date. But I would expect to see evidence of this by the end of the year.”

He continues: “This additional workload could have an impact on profit margins. If these are squeezed, fees could go up. It’s certainly a lever brokers have in their armoury.”

London Money founder Martin Stewart says: “The workload for the broker has risen exponentially since the introduction of these new PRA rules.”

He adds, however: “I take this as a positive move for the market because it will hopefully remove the chancers and amateurs and leave the PRS open to professional landlords who understand their responsibilities to the tenant.”

John Charcol senior technical director Ray Boulger agrees that the most noticeable effect of the new rules to date is the increased administrative burden for brokers and clients.

He says: “We haven’t seen significant movement in rates — although we are seeing some interesting variety in the way lenders assess affordability on existing portfolios.”

Boulger predicts one positive impact on brokers: “It’s going to be more difficult for individual landlords to negotiate their way through the lending market themselves.

“Many will seek the specialist advice and help of a mortgage broker.”

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