Refinancing buy to let mortgages likely as HMO changes near

A buy to let mortgage firm says it’s likely that there will be a spike in refinancing enquiries as landlords meet a new deadline for HMOs. 

A raft of changes come into effect in October, including:

- Introduction of minimum room sizes: rooms used for sleeping by one adult must be a minimum of 6.51 square metres; bedrooms shared by two adults must be at least 10.22 square metres;

- Bedrooms occupied by children of 10 years or younger must be at least 4.64 square metres;

- Local authorities have the discretion to increase minimum room sizes if they wish.

In addition:

- HMOs occupied by five or more people, must have an appropriate mandatory licence, regardless of how many storeys the property covers;

- Purpose-built flats with up to two flats in the block, require mandatory HMO licensing;

- Landlords must obtain a mandatory license if the property is occupied by persons living in two or more separate households.

Penalties for running an unlicensed HMO or for failing to meet the required licensing standards, set by the relevant local authority, could see landlords face unlimited fines. 

But the implications of failing to meet local authority licensing standards on an HMO property could impact future funding claims Andrew Turner, chief executive at Commercial Trust Limited.

“More landlords will be required to bring their HMO properties up to local authority licensing standards. In scenarios where perhaps one bedroom in the property fails to meet minimum licensing standards, there could be future implications, if the landlord wants to remortgage the property.

“Investors looking to remortgage may find that a lender will only base rental stress calculations on rental income from the bedrooms that do meet local licensing rules. That could make obtaining the required level of financing a lot tougher.”