Buy to Let Deposit Increase

Buy to Let Deposit Increase.

New requests for power by the Bank of England (BoE) are being made so they could control the amount that buy to let lenders can borrow. This can see those looking for buy to let mortgage in the South East and London, requiring a 40% deposit to secure the loan.

The powers would also allow the Financial Policy Committee to make lenders stress test buy to let borrowers, this would mean that the income that landlords receive would need to be greater than the interest payments on the mortgage.

Lending for an investment property is usually stress tested by the rent that a landlord receives. For most it would see lenders checking if the landlord’s rental income is greater than the interest on the mortgage.

The new request from the BoE is partially to do with the findings that come from the mortgage market review and has seen buyers being stress tested for repayments at interest rates up to 7%. This would see landlords having to put a bigger deposit down on buy to let mortgages and also being stress tested against interest rates up to 7%.