Landlord Insurance


Potential landlords looking for a buy-to-let mortgage are being warned they could face tighter checks and higher interest rates when they look to buy more properties.


High Street lenders are introducing stricter criteria in response to the buy-to-let boom, which is feared to be pushing up house prices across the UK.


The amount landlords will be able to borrow is expected to fall and they are likely to face tougher questions from lenders if they want a loan.


Lenders typically want to ensure that the income from rent can cover 125% of the repayments. This means if a mortgage repayment is £500 a month, then a landlord will need to set a rent of at least £625.


Lenders currently do not use the actual interest rate of the mortgage but instead use a higher, notional one to ensure landlords will be able to meet the repayments even if mortgage rates increase.


Natwest recently announced that it has increased its rate from 5.25 per cent to 5.5 per cent, which would limit borrowing to £130,909 on the same monthly rental income.


Prospective landlords are also facing tougher questioning about their financial situation.


Landlords applying for a mortgage with Lloyds will be asked whether they have previous experience of buy-to-let, how they have built up their deposit and how they intend to maintain their financial commitments.


They must also prove that they are not wholly reliant on their rental income and that they will also be able to cope with void periods and any repairs to the property.


David Hollingworth, of the broker London & Country, says: “Buy-to-let rates are astonishingly low.”


“So part of the reason banks and building societies are toughening up their lending criteria may just be because they are getting in so much business,” he added.


Landlords, get a great rate on your home or landlord insurance with City Landlord – call 0800 2944 546 today!


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