Mr Clifford shares this view, adding: “The underlying driver in terms of risk assessment is the PRA are looking to avoid having landlords that have limited income, are highly leveraged and are overly reliant on the portfolio income.
Meanwhile, Mark Homer, co-founder of Progressive Property, says the PRA’s rules merely formalised what was already in practice among major lenders.
He says: “Most lenders were following this process since the credit crunch anyway. All of the lenders I have used asked for this information prior to the new rules being enforced as they wanted to make sure they weren’t making loans to people with negative cashflow and other issues in their portfolio.”
Increased workload
There is little doubt the new regulations have made things more difficult for brokers. Not only is the workload higher, but some lenders have pulled back from the market entirely.
Mr Clifford says the underwriting process demands significantly more paperwork and effort than for those with only one or two properties. However, he adds that many lenders in this market will have dedicated teams for portfolio underwriting, which can be helpful.
He says: “It’s just more time consuming, and we’re providing lenders with far more information. There is usually quite a high bar in terms of additional documentation and information needed on background properties.
“Some lenders are still not doing or are no longer doing portfolio lending at all, so there’s been some reduction in choice of overall lenders but there is still consumer choice.
Meanwhile, Steve Matthews, head of buy-to-let sales at Octopus Property, says the industry has adapted well to the new regulations, and that lenders and brokers need to find ways to work better together to overcome the hurdles that the new rules have created.
He says: “Brokers are doing a fantastic job at adapting to underwriting requirements for landlords, but are equally recognising that arranging finance for lenders can be a very time-consuming job.
“Brokers need to understand that paperwork and additional questioning is time-consuming for both parties and that lenders are adapting to regulatory requirements; equally lenders need to understand that brokers are not generally resource-heavy business and need to invest in processes and tech that assist the broker in submitting business in a way that can help both parties.
Geordie Clarke is a freelance journalist
