Around one in three buy-to-let investors is not aware of the regulatory changes which will affect buy-to-let mortgages if they are planning to borrow to invest in more properties or refinance existing ones. These changes to buy-to-let mortgages were brought in last September and make it harder for investors with four or more properties which are mortgaged to borrow more money.

However, a study by Shawbrook Bank found that 28% of brokers who took part in the survey said their clients were not aware of these changes. The new rules were brought in to tighten the lending requirements of buy-to-let mortgages and reduce irresponsible lending. Also in the survey, 61% of the brokers said that even where their clients knew of these changes, they did not really understand the implications. Under the rules introduced by the Prudential Regulation Authority, landlords who have at least four properties are classed as portfolio investors. Banks and other financial lenders will need to review the entire property portfolio, even when the landlord is making an application for funding for a single property. This is having an adverse effect on landlords with multiple properties, particularly if their profits are tight. Landlords need to be aware of the changes in buy-to-let mortgages so they can make any necessary adjustments to their investments and funding.

These tighter lending restrictions, along with new regulations, could be among the reasons why fewer people are investing in buy-to-lets. Research by Retirement Advantage asked people whether they would invest in a property to rent out and provide an income during retirement. Only 35% of people who answered the survey said they would consider it and 62% said they were unlikely to do it. This is a marked departure from last year when 49% said they would consider it and 51% who would not. The over-55s are even less likely to see buy-to-lets as a good way to supplement their income, with only 10% saying they would buy a property to rent, compared with 27% last year.

Retirement Advantage head of product and marketing, Alice Watson, said the reluctance to enter the buy-to-let market could be due to the removal of tax relief on mortgages, along with stamp duty applicable on second homes. However, she pointed out that there are still almost one million landlords aged 55-plus.

The Office for Budget Responsibility is also warning of ‘subdued growth’ in investment in private rentals. Residential Landlords Association chair, Alan Ward, says this warning shows the folly of imposing new taxes on rental properties. He said it was important to acknowledge the significant role that the rental market plays in promptly responding to housing needs. He said the government should put forward a package of planning and tax policies which support private landlords wanting to invest in properties to meet the needs of tenants. Demand is increasing among different age groups and a policy is needed to ensure tenants have an ample supply of adequate properties.

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