Will new rules kill off buy to let mortgages?

Buy to Let Mortgages

Plans to ban “no-fault” evictions will kill off buy to let mortgages, experts have warned. New rules published by housing secretary Michael Gove last week will make it harder for investors to repossess their rental homes – something which first gave banks confidence to lend to landlords in the 1990’s. The changes could effectively reverse the policies that led to the boom in buy-to-let mortgages, instigated by Margaret Thatcher’s Conservative government.

Peter How, an author and landlord with around 40 properties in Yorkshire, said the reforms were “another nail in the coffin” for the private rental sector. “The only reason buy-to-let mortgages were introduced is because there was the option to take back possession of the property. Taking that away undermines the main method of financing for landlords,” he added. “Ultimately it will result in fewer landlords , less stock and higher rents,” he said.

Of the 12 buy-to-let lenders approached by the Daily Telegraph, only Skipton Building Society, Paragon, Santander and Nationwide, said they had no plans to change their policies in light of the “no-fault” eviction ban. The Government has promised to introduce new, stronger grounds for eviction to cushion the blow of banning Section 21. However, details remain unclear and landlords will still be exposed to losses.

The Daily Telegraph

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