Friday, January 13, 2006

Private landlords could find it harder to get mortgages

Private landlords could find it harder to get mortgages

Private landlords could find it harder to get mortgages
Private landlords could find it harder to get mortgages as a result of the government's new licensing regime, lenders have warned.
Compulsory licensing of houses in multiple occupation above a certain size will be introduced in April, along with a raft of new health and safety requirements applying to all private rented properties.
Landlords who fall foul of the new regime, introduced by the Housing Act 2004, could face fines of up to £20,000.
Lenders are poring over the details of the rules to decide if they need to tighten their requirements to cover the additional risks presented by landlords. If landlords are hit by large penalties, it could affect the ability of some to meet their mortgage repayments.
Andrew Moss, product development manager at Bradford & Bingley, the largest buy-to-let lender by balance outstanding, said all lenders offering products to private landlords would be examining the effect of the new regime.
'I would expect all lenders to be reviewing the buy-to-let plans and see what impact they have on how they lend,' he said.
'We will look at what the government has put on the table and see if there is any need for us to change our lending criteria.
There is an impact on the private rented sector through what the government is planning and as lenders we need to take that into account.'
Andrew Heywood, senior policy advisor at the Council of Mortgage Lenders, said lenders were concerned. The costs to the sector in carrying out the new regulatory requirements could outweigh the benefits in protecting tenants, he said. 'What we are saying is that the scale and scope of the licensing should reflect the real risks involved,' he said. 'We remain unconvinced about that.'
There were also concerns about the cost of an HMO license. A single license could cost as much as £1,000, he said.
Mike Stimpson, chair of the National Federation of Residential Landlords, said he was not surprised lenders were looking at requiring more cover for their mortgages.
'If I was granting mortgages I would look for a better balance between what I would loan and what any income on the property would be,' he said. 'There is going to be at least a 5 per cent increase in costs [on running homes].'
But he said commercial pressure on lenders to sell mortgages to landlords could help keep costs down.
The additional cost to landlords of meeting the regulatory requirements meant that tenants would also be facing higher rents, he warned.
'We don't care if the government hits the bad landlords hard but what they are doing is hitting all landlords.'



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