Buy-to-let lending clampdown has already started

The crackdown on buy-to-let has already begun as banks voluntarily tighten their lending rules ahead of official action.

Bank of England governor Mark Carney recently called for the Bank of Englands's the Financial Policy Committee to be given powers over the interest coverage ratio in buy-to-let calculations.

But lenders are already acting to impose tighten their lending rules even before the Bank acts.

Barclays Mortgages and Godiva, part of Coventry Building Society, have both tightened their lending criteria for landlords in recent weeks.

Ray Boulger, senior technical director at brokers John Charcol, told The Daily Mail that lenders are already beginning to impose tighter criteria on their buy-to-let mortgages and this trend would continue.

“A lot of lenders will change their criteria in the next couple of months,” he said.

Buy-to-let is also under a sustained assault from Chancellor George Osborne, who has slashed tax relief and introduced a new surcharge on stamp duty.

Losses on buy-to-let loans have been about twice those incurred on lending to owner-occupiers, according to the Bank of England figures.

Nick Barnes, Chestertons’ head of research, warned that the crackdown on buy-to-let could hit the market, particularly in London.

“We’re likely to see a flurry of activity before the 3% premium in stamp duty in April for second-home buyers and buy-to-let investors, but after that there may be a slump as particularly pensioners and smaller investors are deterred from entering the market and instead look for other investment options. 

"This will hit London the hardest, as around 15% of buyers here are buy-to-let or second-home investors."