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Now Bank of England launches attack on buy-to-let

Chancellor George Osborne isn't alone in launching an attack on buy-to-let, Bank of England governor Mark Carney is also muscling in on the act.

Carney has asked for the Bank's the Financial Policy Committee to be given powers over the interest coverage ratio in buy-to-let calculations, in a bid to cool the market.

This is the latest blow for property investors and follows last week's shock surcharge on stamp duty for buy-to-lets and second properties, announced in Osborne’s Autumn Statement.


Barclays has already announced that it is increasing its rental cover ratio from 125% to 135% to protect landlords from affordability shocks.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said the Barclays move is likely to be the first of many.

"We are getting to the stage where buy-to-let is going to become a 50% loan-to-value (LTV) product in the south-east and London at least, taking the buy-to-let investor into the same space as a seasoned landlord.

“This means that if you are going to invest in property you won’t be leveraged at 85% LTV, for example, which was commonplace during the boom, but will need to find a lot more equity.”

Harris said that recent events will increasingly exclude the small-time investor with a property or two in favour of larger investors with much deeper pockets.

“Higher-yielding properties, which will support lending at 75%, can be found in the North so those who believe in the future of the Northern Powerhouse may be tempted to turn their attentions elsewhere.

“There will be very few properties which can produce this level of yield in the south.”

This would cut the number of investors entering the market, Harris added. "We don’t expect landlords to sell up en masse because the majority take a long-term view and invest for capital growth as well as income.

“These developments are not good news for tenants as landlords will inevitably push up rents if they can to cover some of their higher costs and removal of some tax breaks.”


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