Paragon Mortgages has welcomed the PRA’s Supervisory Statement, which will introduce new minimum underwriting standards for buy-to-let mortgages. Published after extensive consultation, the new standards introduce more comprehensive and uniform affordability testing for buy-to-let mortgages.

The standards will usher in new rules to ensure lenders undertake a thorough assessment of mortgage affordability based on a more standardised review of rental income and property costs, together with a full understanding of each landlord’s wider economic circumstances.

This will include a requirement for lenders to take into account how buy-to-let applicants are impacted by the tax changes introduced last year. Importantly, the new standards also require that lenders tailor their underwriting approach to distinguish between landlords with small property portfolios of no more than three buy-to-let properties and those with more extensive and complex property interests.

John Heron, MD at Paragon Mortgages, said: “By requiring a more consistent approach across the market, the PRA should be able to ensure that the strong credit performance of buy-to-let lending is maintained and that lending remains sustainable.

“We would however, expect these measures to restrict the level of growth in the buy-to-let market going forward, by cutting out more marginal business.”