With the second round of PRA rules coming into effect next month, buy-to-let brokers have never been more important to their clients
As we head towards yet another shake-up of the buy-to-let sector, it’s understandable that brokers and consumers are feeling somewhat nervous.
As adaptable as this market may be, the amount of ‘adapting’ we’ve had to do of late would test any sector. Now, with the second round of Prudential Regulation Authority rules coming into effect next month, there is a definite air of concern in the industry.
From 30 September, lenders will have to pay greater attention to affordability for portfolio landlords, including assessing rental coverage for the rest of the properties within the portfolio. This may result in longer processing times as lenders get to grips with the new requirements and may also cause confusion among borrowers over which information and documentation they need to supply.
Communication and education will be imperative here. Ahead of April’s changes to landlord tax relief one thing became clear: many landlords had not got to grips with how the changes would affect them. Indeed, according to Paragon’s latest Private Rental Sector Trends Report, while the number of landlords who understand the tax changes has risen to 88 per cent (up from 71 per cent six months ago), this still means 12 per cent of landlords do not understand – despite the cuts to tax relief having begun. We cannot have the same thing happen with the PRA rule changes.
Thankfully, several lenders have revealed how their approach to portfolio landlords will change next month – including Accord and Santander – while Paragon has already implemented the new rules. However, we are just weeks from the introduction of the regulation, so the rest of the lending community needs to come forward with more details – now.
The longer lenders wait before announcing their plans, the less prepared brokers will be. It seems some lenders are waiting to see what their competitors do, but brokers need clarity.
And, of course, brokers need to play their part in educating clients. Make sure you’re up to speed with the changes taking place; talk to lender BDMs to get a sound grasp of their approach.
Never have buy-to-let brokers been more important to their clients.
Ying Tan is managing director of Buy to Let Club