Landlord blog: What does MMR mean for landlords?
With all property news centred on the newly implemented Mortgage Market Review (MMR), Rob Denman considers what these changes mean for landlords looking to remortgage or extend their portfolio.
“With many things in life, the more often you do something the easier it becomes. A recipe followed again and again eventually becomes second nature, a regular morning run gradually sees you beat your PB and, of course, the proverbial riding of a bike.
“The same used to be somewhat true for buying property. Whilst getting a mortgage was never ‘an easy ride’, the experience was a little less stressful for landlords because they’ve ‘been there, done that’. They have an understanding of how long things take, of what dramas can unfold and what they need to do and provide in order to speed up their transaction.
“But the mortgage world as landlords once knew it now bears a very different, far more detailed landscape.
“The main focus of the Mortgage Market Review is to check the affordability of the borrower. This may sounds like nothing new but, believe me, it is.
“Lenders are now scrutinising outgoings and I mean really scrutinising; you may have previously just ‘estimated’ your monthly expenditure but now lenders are going through bank statements with the finest of tooth combs. This means gym memberships, wine subscriptions, insurances and even your general shopping habits will be put under the microscope and potentially count against you. And for landlords there is likely to be a firm focus on all your other property commitments.
“So why are lenders getting so meticulous? It’s because they are trying to ensure the borrower can afford the repayments – not just at the current rate but also if the rate should increase. And this is what has got so many people so riled up – that mortgage applications may be rejected on the basis of something that may never happen.
“We’re certainly going to have to go through a ‘bedding in’ process and over the coming months we’ll see how these changes will impact on borrowing. That said we have already seen that mortgage applications are taking significantly longer than they previously were. One example was that of a remortgage client – note remortgage. They were remortgaging with their existing lender – note existing lender. They were subjected to a phone interview of over three hours!
“Naturally I am very keen to see how lenders deal with buy to let mortgage applications, particularly given that landlords are often reliant on the rent to meet these repayments. I am just fearful that lenders could begin to consider the risk of rent arrears and the financial impact that would have on a landlord’s affordability. I guess time will tell.”
Rob Denman is a solicitor and Head of GW LET (Landlord Empowerment Team), specialising in such landlord legal issues as rent arrears, tenant eviction and tenancy deposit disputes. In his spare time Rob enjoys watching football and running. He is currently training for his second half marathon.
Content correct at time of publication