Landlords now have to follow the new lending guidelines stated by the Bank of England’s Prudential Regulation Authority. The rules involve measures that save the landlord from overstretching. They also require a lot of cross checking including the personal income of the landlord unlike previous rules which only checked whether rent received will suffice covering the mortgage.
Previously the insurers used to dig deeper into the borrower’s details like living costs, income tax payments and credit commitments. However, now it will on both sides. Although, all landlords may not be following these rules as of now, soon these rules would be made official. The few of them which are already applying these guidelines go through the stress test to prove that they are capable enough to pay the mortgage payments at interest rates which are charged higher than the normal.
The new rules will also apply to accidental landlords. As stated by the authority from Bank of England “To avoid existing borrowers being adversely affected when re-mortgaging, the expectations do not apply to buy-to-let mortgages where there is no additional borrowing beyond the amount currently outstanding under the existing buy-to-let contract.”
This news has been well received by all quarters of the insurers division. Shay Ramani, the CEO of FreePriceCompare expressed his opinion by stating that “it is a positive change which will stop people from simply re-mortgaging. It will benefit the landlord by preventing any risks.”
For more details about the type of home insurance and landlord insurance, just check our website Freepricecompare.com. You can also call us on 02034757476.