The Bank of England has tightened the regulations for lending to buy-to-let investors.
Under the new rules, lenders must set tougher standards for approving buy-to-let loans including affordability checks and ‘stress tests’ should the interest rate rise to 5.5%
In terms of affordability, the Bank is recommending that rental income equals 125% of the mortgage payment.
These changes are likely to be introduced from January 1 with more complex changes from September 30 next year.
They follow changes brought in by former chancellor George Osborne to limit the tax relief that can be claimed on mortgage interest payments, which take effect in 2017, and also follow a 3% surcharge on the stamp duty for second or buy-to-let homes.