The implementation of UK ‘buy to let’ investor loan blocked, house price under control


The UK property market has slowed markedly in recent months and is showing a trend more popular with buyers than sellers. UK house prices rose 5.6% per cent year-on-year in June, although not weak growth, it is compared with 8% last year, according to data from the UK Land Registry.At the same time, market activity is also declining. The monthly UK housing market survey by the Royal Institute of Chartered Surveyors (RICS) describes the May market as stagnant.

The June report, released this week by RICS, is expected to provide fresh evidence of slowing down the number of members reporting rising prices. More attention is now being paid to the sharp fall in house prices in London’s high end market, which in fact is slowing down across the UK.

Investors who want to buy a house for Rent (buy to let) are now faced with new tests that they need to prove their ability to pay for their house, and because of that, tens of thousands of people are expected to face the possibility of getting rejected for the mortgage application or has to pay higher interest rates.
The new policy was launched because of a change in Europe’s policy to borrow money from accidental landlords, which is now about one fifth of the applicants, with the total of 1.6 million housing purchase mortgages .

What is an ‘accidental landlord’? Owners with any one of the following two situations can be called as ‘accidental landlords’:

People with inheritance owned property. They want to sell one of the property, but did not make it, and has to turn to rent. In a related consultation document published by the Ministry of Finance, it was noted that in these ‘accidents’ cases, the reason why the loan applicants became ‘landlords’ was not their voluntary investment, but because of the fact that they were forced to do so by various contingencies, hence, the government wanted to include these borrowers in a more secure framework.

The new deal, which was implemented in March 2016, could have a certain impact on the UK property market. In 2013, Britain had a total of 151,000 ‘buy to let’ loans were successfully lent. Under the new policy, this type of mortgage loan may be reduced because borrowers are tested for the ability to pay. Most existing ‘rent buying’ loans are linked to the rental income of the property when calculating the amount. If the new deal is implemented, it means that older house owners may no longer be able to apply for rent for lease mortgages, as most lenders require borrowers to provide a plan to pay off their entire payments before they retire. By convention, European regulations will not affect the UK’s mortgage market, but this new policy is part of the mortgage credit guideline (Mortgage directive) and may also have a chilling effect on other types of mortgages.

A spokesman for the UK Mortgage Institutions Association (Council of Mortgage lenders) said that borrowers affected by the new policy would be less than 20% of the total for ‘buy to let’ loans, but they were not able to provide accurate estimates. Housing Loan Applications Consultants say that the new policy will increase the cost of mortgage applicants as well.

There is widespread concern that ‘buy to let’ investors may boost house prices, thereby squeezing buyers out of their homes. Because of the property of the UK and the high rent income characteristics, so overseas investors flocked to buy a house for renting in the way of long term investment.

A recent survey of real estate data experts showed a zero growth in UK housing prices in September, the first month in 19 months of zero growth in UK house prices.


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