sTaTus quo


At the end of 2008, Moneyfacts listed 45 lenders active in the buy-to-let market. By March 2010 that number had fallen to 39. And Datamonitor research showed that in 2009, Lloyds Banking Group through BM Solutions and Nationwide Building Society through The Mortgage Works accounted for 80% of gross mortgage lending in the buy-to-let sector.


But Lloyds – which owns Cheltenham & Gloucester and BM Solutions – announced in September this year that it was pulling back from buy-to-let by restricting maximum buy-to-let loans to £2 million per person, secured to no more than three properties. Previously the lender offered up to £10 million per person on up to 10 properties.


By contrast, Aldermore Residential Mortgages debuted in May, offering a range of buy-to-let deals funded by the retail deposits collected by Aldermore Bank. Precise Mortgages also came to market this spring with wholesale funding to the tune of “hundreds of millions” to fund new buy-to-let loans. Various building societies have got back in the game in a relatively small way, but perhaps the biggest news in buy-to-let this year has been the return of specialist buy-to-let lender Paragon Mortgages. After being out of the market since February 2008, Paragon re-entered the fray in October 2010 having secured a revolving warehouse funding line of £200 million from Australian bank, Macquarie.


“Lloyds and Paragon seem to have polar views of the market,” says Antonaides. But buy-to-let specialist broker Mortgages for Business’ managing director, David Whittaker, says that Lloyds’ recent move won’t affect their volumes that much in reality.


“Most people don’t have three mortgages with Lloyds Banking Group – let’s dispel the myth that their announcement will prevent lots of people doing business with them, it won’t,” he says.


On Paragon, Whittaker says re-entry to the market is less about volume and more about sentiment. “Whether they borrow from Paragon or


not isn’t the point, it’s about sentiment. Landlords from Liverpool to London have united in the view that there is confidence back in the market,” he says. It seems this may well be the case as both Platform and Santander have indicated they see potential in the market. “We welcome the improving market conditions in the buy-to-let market,” says Iain Laing, chief credit officer at Santander. “We continue to review this market for segments that we can service well, and that present tolerable levels of risk. “For Santander, the question about entering the buy-to-let market is a matter of ‘when’ and ‘how’; certainly not ‘if’.” Platform, specialist lender subsidiary of the Co-operative Bank, has also suggested it plans to increase lending volumes via intermediaries in 2011, though it is as yet undecided about the balance of buy-to-let and residential. David Finlay, Woolwich intermediary business director, says the larger lenders have to consider the balance of their books and lenders are required to hold more capital for buy-to-let loans than prime residential. “Woolwich will do no less but no more buy-to-let next year than we do in 2010,” he says.


But he adds: “As in most sectors of market, there is pent up demand at the moment. Until the market finds a way to satisfy that we’re all going to struggle. I do think personally that buy-to-let will be a growth sector because the residential mortgage market is still restricted and people need somewhere to live.” Things are already picking up. The latest survey of the market by Moneyfacts showed 54 active lenders in the buy-to-let arena. Today there are 306 mortgages available to buy-to-let landlords, which is just one tenth of what it was at its peak (3,648) in July 2007, but at its worst just over a year ago the number of mortgages available had fallen by 95%. Although the market remains difficult for investors, fixed rates on buy-to-let products are falling and the number of lenders and products is back on the up. Loan to values are also rising and Moneyfacts figures show that deals for landlords with a 20%


“Rates and fees are


still very high and lenders are being viewed by landlords as


opportunistic. Landlords are telling us that at higher LTVs it’s very


difficult to make a profit. This is likely to continue for the foreseeable future and will only be resolved when there are more lenders competing and giving landlords greater choice.”


Ray Bohringer, director, Obligo


“The buy-to-let market remains fairly subdued with the mystic art of credit- scoring remaining a major issue. There have been some interesting products slowly starting


to appear with The Mortgage Works and Clydesdale and Yorkshire Bank offering 80% LTV deals. The latter only offers mortgages direct though whilst most of the remainder of the market offer deals that require a minimum 25% deposit.”


Matthew Fleming-Duffy, director, Abacus Financial


“It is a tough market


with very few remortgage options due to highly priced rates, reduced valuations and reduced rental incomes.


Furthermore, the current lending criteria were set


at a time when the market was buoyant and it has yet to be relaxed. There are underlying risks which have not yet materialised for inexperienced investors including increasing interest rates and reducing yields against a backdrop of limited refinancing options and stagnant property values.”


Pete Wright, director, CBK Colchester mortgage introducer NOVEMBER 2010 31


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