Buy-to-let investors without huge deposits could be ‘locked out’ of buying in two thirds of towns and cities if new strict new lending criteria is applied, new research suggests.
Analysis of 85 towns and cities across the country found that 59 would not be accessible to landlords if tighter lending criteria is applied as it would require them to have a deposit of at least 40%.
And Bedford is in the top five places in the country where landlords face the highest barriers to entry, according to the research by Property Partner.
The analysis is based on tighter lending criteria being proposed by the Bank of England’s Prudential Regulation Authority.
It wants lenders to introduce strict new measures to ensure landlords do not overstretch themselves and can afford their property investments in the future, even if rates start to rise.
These would include so-called stress tests, which would examine if a borrower could afford the loan if interest rates were raised - something that could affect how much they would pay each month on their mortgage payments.
The average house price in Bedford is £256,074, the 5.5% buy to let mortgage interest rate per month is £715, the average rent is £725 and the deposit needed to cover the 145% ICR is 58% with the minimum value of deposit required coming in at £148,523.
Only Chicester, Cambridge and Worcester face higher barriers than Bedford.
Most lenders currently require the rental income on a property to cover 125% of the mortgage payments. Some lenders have already begun increasing this percentage ahead of the potential changes being considered.
These include Barclays and Nationwide, which have raised their rental cover requirements to 145%.
Landlords have already been hit by a tax clampdown that included a stamp duty surcharge of 3% on buy-to-let properties, which was introduced by the Chancellor in April.
In addition, they also face a gradual withdrawal of mortgage interest tax relief from April next year.