When the Bank of England announced their new limits on mortgage lending last month, many people looking to buy were worried about what this might mean for them.
On 26th June, the Bank of England announced that mortgage lenders will not be able to lend more than 15% of their total new residential mortgages at loan-to-income ratios of more than 4.5 times. Along with this, Bank of England Governor, Mark Carney, announced that there will be a new affordability test, where borrowers will only be approved a mortgage if they will be able to afford the loan at interest rates 3% higher than the current rate.
So who will be affected by the Bank of England changes?
Luckily, the new macroeconomic tools to ‘cool off’ the property market shouldn’t have too severe an effect. Firstly, not all banks will be affected by the new limits. The new rules only apply to lenders that advance mortgages that are worth more than £100m per year. So, banks and building societies that work with lower figures will be exempt- good news for buyers looking to take out large loans relative to their income.
Secondly, following the financial crisis, most lenders are pretty savvy when it comes to lending these days. Most banks and building societies rarely lend to borrowers with high loan-to-income ratios, and the most lenders usually approve is around 5 times income, meaning the drop isn’t too drastic.
I’m a landlord, will buy-to-let loans be affected?
The good news for landlords is that buy-to-let mortgages will not be touched by the new rules. Mark Carney’s new limits are not inclusive of mortgages for buy-to-let investments meaning that landlords will be completely unaffected. If anything it could be good news- landlords may be at an advantage in the London market, which typically has the highest loan-to-income ratios.
So, with the new Bank of England regulation having little to no effect on landlords investing in new properties, landlords can maintain their focus on effective property management. Arthur Online takes care of all your property management related tasks, all in one place, meaning you can manage your properties no matter where you are.
If you are a property manager, property owner, landlord or letting agent, your business will save time and money by using Arthur. Try out the free Arthur Demo today to see how!