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28th September 2017

PRA New Buy-to-Let Underwriting Requirements

PRA New Buy-to-Let Underwriting Requirements

As of 30 September, the Prudential Regulation Authority (PRA) are introducing new underwriting standards for buy-to-let (BTL) contracts. This includes bespoke standards for “portfolio landlords” – defined as those with four or more properties.

The Changes The new standards are designed to reflect the differences between simple and complex buy-to-let (BTL), the latter of which involve cash flows and costs arising from multiple tenancies. If a customer falls within the definition of a portfolio landlord, it must be proved whether they can sustain their buy-to-let investments in order to obtain a mortgage. As a result, a customer will be expected to provide the following information to the lender:

  • Evidence of their experience in the BTL market and their full. portfolio of properties and outstanding mortgages.
  • Evidence of their assets and liabilities.
  • Merits of any new lending, together with a business plan.
  • Historical and future expected cash flows associated with all of the customer’s properties.

Lender Requirements The PRA have also outlined their requirements for lenders when assessing the affordability of a BTL contract. An interest coverage ratio test and / or a detailed affordability test will be required. Lenders will also take likely future interest rates into consideration. Lenders have adopted a fairly wide range of methods to deal with the regulatory changes. Therefore, it’s important that you’re fully aware of what is required for the lender in question.

More Information

If you have any questions, please get in touch on 01242 226353 or at

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