PRA changes mean fewer lenders for portfolio landlords to choose from

Michael Lloyd

April 25, 2018

Almost half (46%) of portfolio landlords who had submitted a mortgage application since the introduction of the PRA rules at the end of September 2017 reported a reduction in the number of lenders available to choose from.

Paragon’s PRS Trends research found this contrasts with non-portfolio landlords, where a majority (67%) said that there had been no change in lender choice.

The rules focus on ensuring that all lenders apply more detailed underwriting principles when evaluating portfolio business from landlords with four or more mortgaged properties.

John Heron, managing director of mortgages at Paragon said: “The more detailed underwriting required on larger portfolios makes it more difficult for mainstream mortgage lenders to compete successfully for the full spectrum of professional landlord business.

“As a result, we’re seeing a polarisation in the market, with specialist lenders playing to their strengths, adding product features that enhance value for larger scale landlords and increasing their share of more complex, portfolio business.”

Almost all landlords reported an increase in documentation requirements across the market, with eight out of 10 (80%) saying requirements had increased and seven out of 10 (70%) saying they had increased a lot.

Similarly, 80% of all landlords noticed an increase in lenders’ mortgage processing times. However, more than half (54%) of landlords with larger portfolios said that processing times had increased by a lot compared with just one third (33%) of smaller scale landlords.

Three out of 10 landlords (30%) said loan-to-value ratios on offer were also lower than before.

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