The PRA has issued a consultation paper on underwriting standards for buy-to-let mortgage contracts.  In the consultation paper the PRA proposes:

  • A set of expectations for firms that underwrite UK buy-to-let mortgage contracts where the land is intended to be occupied as a dwelling on the basis of a rental agreement, in pounds sterling, regardless of whether the borrower is an individual or limited company.  This proposal aims to prevent a marked loosening in buy-to-let underwriting standards and also aims to curtail inappropriate lending and the potential for excessive credit losses.
  • Clarification in relation to the application of the small and medium enterprises (SME) supporting factor on buy-to-let mortgages.  This proposal is aimed at enhancing the transparency and consistency of the PRA’s regulatory approach.

The proposals are relevant to PRA-regulated firms that undertake buy-to-let lending that is not already subject to FCA regulation.  The clarification regarding the SME supporting factor is relevant for firms bound by the Capital Requirements Regulation.

The consultation closes on Wednesday 29 June 2016.