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Filling their Boots Part 2
In May we reported that the Banks were piling into Buy to Let and questioned whether or not that was a good thing. Well it seems as though the FPC is now getting concerned about the threat that Buy to Let lending may pose to financial stability going forward. Having observed that it was BTL that was almost exclusively driving growth in mortgage lending, the FPC pointed out in its recent Financial Stability Report that lenders apply much stricter criteria to owner – occupiers, particularly in relation to so-called stress testing and affordability, than they do to their Landlord Borrowers. The FPC calculated that if mortgage interest rates rose by 3% then nearly 60% of those taking out BTL mortgages in recent times would see their rental coverage collapse thus signalling repayment issues. On the same measure only 4% of recent owner-occupiers would struggle. With a raft of tax measures that will make it harder for BTL to make attractive returns will the inevitable “normalisation” of interest rates see disgruntled Landlords sell up?