Buy-to-let is under siege with the phasing out of mortgage interest tax relief from April, a 3 percentage point surcharge on stamp duty for landlords and changes to affordability requirements.
Even so, it is not all doom and gloom as there are still many lenders keen to lend. While affordability criteria are tougher, mortgage rates are extremely low, helping landlords keep costs down. Some lenders are proving more flexible than others and will allow personal income to support rental income shortfalls, which can be useful for landlords.
While most lenders are adopting a rental stress test based on 145 per cent at a notional rate of 5.5 per cent, there are more bespoke solutions available. For example, one lender will assess rental cover starting at 125 per cent at 4 per cent for those borrowers opting for a five-year fix. Other lenders will allow 125 per cent for basic-rate taxpayers.
It makes a big difference to the amount a landlord can borrow: with a rental stress test of 5 per cent at 125 per cent, you could get a mortgage of £192,000 on a property with a rental income of £12,000 per annum but this would fall to £150,470 if the calculation increases to 5.5 per cent at 145 per cent. It means most landlords will be able to borrow far less than they have been used to, which means they may find it harder to remortgage, particularly if they need to capital raise.
There are options out there if you seek independent advice. With many people still keen to invest in buy-to-let, whether it is in your own name or within a limited company, that advice is more crucial than ever.