News Review: Buy-to-let
Competition heats up as mutuals jump in
by Bob Young, managing director, CHL Mortgages
the big lending news over the course of the last month came perhaps with the announcement that Skipton was to begin offering buy- to-let products for the first time since it pulled out of the sector in 2009. the products are a cautious first toe back in the water from the mutual with maximum loan to values of just 60% offered on both a two and three-year fixed rate. However, greater product availability and competition back in the sector are always to be welcomed - particularly when they continue the responsible lending approach that is
“Small tweaks to pricing and cri- teria over a sig- nificant amount of time should be the way to go; in this market it truly is a case of slowly, slowly, catchy monkey.”
vital if we are to maintain confidence and ensure that we as a lending community are not sending out the wrong message. Skipton’s new products
were soon followed by a new offering from Leeds, perhaps suggesting that the mutual sector is now
Time to reflect on the Budget
The March Budget has been and gone and we have all had time to reflect on the various announcements and what it means in particular for the private rental sector, buy-to- let lenders, landlords and, of course, advisers. Certainly, there were a number of positive measures announced which perhaps were not particularly focused on private landlords but ultimately will be of benefit. I’m thinking of course of the stamp duty
changes for portfolio purchases which ultimately had the institutional investors in mind, however they will clearly bring with them a cost saving for any landlord purchasing two or more properties. It remains to be seen whether the intended
recipients of such measures bite into this particular carrot, however it has been cautiously welcomed by some who are
10 mortgage introducer MAY 2011
much more comfortable with buy-to-let than it has been in the recent past. Leeds’ discounted product is available at a maximum of 70% LtV again showing a cautious lending approach. all in all, the total number
of buy-to-let products is on the rise. research from mortgages for Business shows that product availability in Q1 2011 had more than doubled from the numbers of a year ago – up from an average of 142 to 298. again it is not a staggering rise but it is slow and steady progress. certainly within that
rise there are unlikely to be many products offering 85% LtV or less than 125% rental cover, and this to my mind is a good thing. Far be it from me to tell other lenders how far up the risk curve they should go but
interested in residential property investment and pooh-poohed by those who are still unconvinced that residential properties are an asset class that can provide anything near the return they crave. Looking at the long-term property remains
a strong investment and it is only when you view it as a means to short-term riches that you can come unstuck. For the vast majority of landlords we deal with, this is a long-term game and all the underlying drivers suggest that rental demand is likely to increase and we may even be on the verge of a more significant shift in UK society which takes us away from an aspiring home-owner nation to contented renters. Worker flexibility and the need for greater
social mobility will only go to increase the need for rental properties. This is not the private rental sector or buy-to-let indeed on the verge of boom time, it is however acknowledgement that times are changing and that property needs are perhaps changing most.
those who have any idea of recent history would do well not to get too carried away. Small tweaks to pricing and criteria over a significant amount of time should be the way to go; in this market it truly is a case of slowly, slowly, catchy monkey.
NOVICE LANDLORDS DO NEED HELP
One might suggest that The Association of Residential Letting Agents’ recent guidance to potential new landlords is nothing but common sense, but given the risks taken by some a few years ago, there is nothing wrong with stating the obvious once in a while. It says do your research, understand the local market where you may want to purchase, make sure you are aware of your responsibilities, understand the financing, know what sort of mortgage you can access and how this works and make sure you use the services of only licensed letting agents. All good stuff and not to be sniffed at, however one still flinches somewhat at the thought of large numbers of novices waiting to get into “a good thing”. We are still very much of the opinion that buy-to-let is a sector for professional landlords and, while there is nothing to suggest that the novices won’t turn into professionals, we should still outline the potential pitfalls and the rather significant responsibilities that come with being a landlord.
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