Ying Tan

Getting ready for the next round of PRA changes

We may be six months away from the next round of Prudential Regulation Authority rules coming into play, but landlords – and brokers – are already concerned about the implications they will have.

As is often the case with regulation, one thing seems certain: costs will rise. This is something that never seems to be discussed when policies like this are implemented. It is frustrating, as those facing the brunt of those cost rises tend to be the people the policy was intended to protect.

As of September, lenders will be required to carry out stringent checks when portfolio landlords apply for a buy-to-let mortgage. This will involve checking the finances for each of the landlord’s properties. Understandably this will mean the lender’s workload will increase significantly and when workload increases, costs must be recouped somewhere. I imagine in this case it will be in the form of rate rises.

Much of this will be unavoidable. Staff will need more training and will need to spend longer on each case, so clearly each case will become more expensive. However, I would hope our sector – and by that, I mean the specialist lenders who understand the buy-to-let market – may be able to offer some sort of lifeline to landlords.

The rules apply to all lenders, both specialist and mainstream, but specialist lenders will, of course, have more experience in dealing with complex cases and certainly in dealing with portfolio landlords.

While mainstream lenders will have more of a job in training their staff to cope with the increased regulations, specialist lenders have a head start.

Lenders will hopefully be looking at their processes now and will start to make the necessary adjustments where possible to improve efficiency so that the impact of the new regulation will be minimised. With the government’s focus on the buy-to-let sector showing no sign of letting up, the buy-to-let industry can only hope lenders react accordingly.

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