UK landlords are likely to need a deposit of at least 40 per cent to purchase in most major towns and cities, following a potential move to interest rate coverage (IRC) ratios of 145 per cent.
New research from property crowdfunding platform, Property Partner, measured the effects that the changes would have on landlords investing in certain areas. Worcester and Cambridge fell at the top end of the scale, with required deposits of 61 per cent and 60 per cent respectively following a move to IRCs of 145 per cent, whilst deposits in Chichester would likely rise to 59 per cent.
Certain lenders, including The Mortgage Works, have already announced changes to their IRCs, while others such as Foundation Home Loans have also changed their requirements.
Chief executive of Property Partner, Dan Gandesha, said: ‘Traditional buy to let landlords have had it tough of late with successive assaults on their potential income. This lending squeeze will only increase the financial barriers to entry to the market, restricting access to only cash buyers or those with hefty deposits, and potentially forcing some existing landlords to sell up. Highly-leveraged landlords seeking to remortgage could face a nasty shock, if their bank tells them they no longer qualify for the same loan to value mortgage.’
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