There is a lack of awareness amongst the property investor community of the changes that the PRA had made to its rules at the end of September 2017, according to the findings of Shawbrook Bank’s annual Broker Barometer survey.
This is despite the implications these changes may have on investors’ ability and amount they may be able to borrow in the future.
Worryingly, 28% of brokers surveyed cited that their clients were not aware of the changes at all, with 61% reporting that their clients were aware of the PRA rules themselves, but lacked enough understanding of changes that were made, specifically those made to underwriting standards for buy-to-let properties. This is despite brokers listing the ‘knock on effects of the PRA/FCA regulations’ as the top issue likely to impact their clients in 2018.
Shawbrook found that the regulations now split landlords into two camps, the first being those who mortgage three or less buy-to-let properties – these investors are now classed as ‘non-portfolio’ landlords. The second camp, who are likely to see a bigger impact from the new requirements, are those who mortgage four or more rental properties – these investors are now classed as ‘portfolio’ landlords. The changes that the PRA has made to its rules now mean that lenders must look even closer at ‘portfolio’ landlords’ income and affordability, with the aim of protecting them from any future adverse impacts, such as interest rate rises. Due to this closer scrutiny, the amount that property investors’ can borrow may change.
Brokers surveyed however reported that the changes to regulation are having a positive impact on business. 44% of brokers reported an increase in portfolio landlords approaching them following the changes to the PRA requirements, with 58% of brokers believing the changes should help their business, particularly as landlords seek further guidance on the changes. This highlights the value placed by investors on specialist professional advice.
Karen Bennett (pictured), managing director – commercial mortgages at Shawbrook, said: “The Broker Barometer has highlighted the critical need for more education in the investor market regarding the impacts of regulatory change. The benefits of increased awareness are two-fold. Firstly, it should help prevent clients from sleepwalking into a problem and allow them to adjust their investment strategy accordingly.
“Secondly, according to our research, brokers are also seeing increased enquiries from landlords which demonstrates that the value of professional advice should never be underestimated and that there are still opportunities for business growth. We aim to continue to support the broker community with information on all aspects of the regulatory landscape moving forward, and look forward to working with industry bodies such as the NACFB in this regard.”