With the new standards from the Prudential Regulation Authority for portfolio buy-to-let landlords now in place, brokers and landlords alike have had to adapt to these changes or risk falling at the first hurdle when applying for a mortgage.
Critical to all this of course is how the PRA defines a portfolio landlord. Under the new rules, landlords with four or more mortgaged buy-to-let properties must submit additional information as part of the application process. The PRA now asks lenders to undertake a much more holistic assessment of the borrower when considering a loan application, and that means more information needs to be provided.
However, portfolio landlords are not a homogenous group and a landlord with four buy-to-let properties is likely to operate very differently to a landlord with more than 100.
While the latter may have a high volume of properties in their portfolio, our data suggests that it is the landlord with fewer properties who is the most likely to experience difficulties when complying with the new PRA standards. Our figures show that 71 per cent of landlords with 20 or more properties are likely to manage them as a full time occupation.
However, this drops to 59 per cent for those with 11 to 19 properties, 41 per cent with six to 10, and 27 per cent from four to five properties.
These landlords who manage their buy-to-let portfolio full-time are much more likely to have all the necessary additional information to hand, not to mention a support team of financial advisers and property support services to help them if they don’t.
By comparison, landlords with a smaller portfolio, where it’s not their full time job, are more likely to have a DIY approach and therefore providing the additional information sought by lenders is likely to prove more challenging.
Indeed, one of the fears when the new standards were announced by the PRA was that buy-to-let landlords would find it more difficult to access a loan, particularly from high street banks that have less appetite or capability for lending to more complex or specialist cases. It’s evident that landlords with four to 15 mortgaged buy-to-let properties will find it a harder process to navigate than those with larger portfolios.
As always though, where there’s a pain point for landlords seeking finance, there’s an opportunity for brokers to demonstrate real added value by helping these landlords adjust to the new standards. Navigating these changes and demonstrating regulatory insight could lead to long lasting relationships, especially with those landlords who’d one day like to pay others to look after their portfolios for them.