Will buy to let mortgage survive the current market?
It shouldn't have to be said that the mortgage market is going through a state of flux at the moment and yes that is an understatement. The mortgage market over the last 6 months has turned from a well oiled machine to what can only be described as a farm yard tractor left out in the field for 10 years left to just seize up.
As a result of this tightening of the credit markets, lenders have decided what type of business they want and more importantly what type of business they don't want. As a result, self certification is all but a Dodo and extinct, a high loan to value mortgage is considered 80%. On that note if you say 100% mortgage to anyone in the industry they will say wow I remember those didn't they come with flared trousers and some very dubious music ha-ha. But seriously the main business area that has suffered and suffered in a big way is Buy to Lets.
Buy to let, it has to be said, has fueled a large proportion of the housing growth over the last 5 years. It has been this market that has kept the property market running. That said it has not come without a great cost to both the economy and ordinary people. I say ordinary people because it has been ordinary people buying buy to let and maybe that has been the fundamental problem.
Back in the 1980s, car auctions were primarily the domain of people from the motor trade, and to see an everyday member of the public there was a rare sight indeed. However, there began a trend for people going to these auctions in an attempt to buy a fixer upper, do a bit of work on it and sell it on for a bit of a profit. Suddenly every Tom, Dick and Harry was a car expert and the auctions were full of these people, all trying to turn a fast buck.
What really happened is that a lot of ill informed people ended up paying too much money for a heap of junk which they could do absolutely nothing with, and they ultimately lost their money which they thought they had so wisely spent. The reason for this analogy is that the same situation has arisen in the housing market. People with no real knowledge have been playing entrepreneur in the housing market, with a lot more money than it takes to buy a second hand car. Many people have paid far too much for properties, some without even seeing the house in question.
I have been buying property for over ten years professionally and I don't mean I bought my own home. I have bought quite a few buy to lets. Even with all this experience I would never buy any property without seeing it and I do not know any other professional landlord who would. So why oh why do ordinary people think they can step into this market and treat it with what can only be described as reckless neglect.
Unfortunately what has happened is as the saying goes; they have ruined it for the rest of us. The irresponsible borrowing and buying has put the lenders at risk as they are finding themselves flooded with customers who can't repay their loans, and as such, the lenders now don't want to lend to anyone. Loan to value for buy to lets has dropped recently from 85% to 75% and it is estimated that with falling property prices, this will drop even further.
All this leaves an industry in great turmoil with very little prospect of recovery. What I suggest is, I would like to see forward thinking lenders come out with a professional buy to let product for landlords that have over ten properties. These landlords have already demonstrated they can fund purchases up to now and it would mean that they could get into a market that is quite beneficial for buyers in general. In addition this type of lending would have the result of producing some buyers in the market place which would at least keep the housing market moving at a trickle which is more than it is moving at the moment.
As a result of this tightening of the credit markets, lenders have decided what type of business they want and more importantly what type of business they don't want. As a result, self certification is all but a Dodo and extinct, a high loan to value mortgage is considered 80%. On that note if you say 100% mortgage to anyone in the industry they will say wow I remember those didn't they come with flared trousers and some very dubious music ha-ha. But seriously the main business area that has suffered and suffered in a big way is Buy to Lets.
Buy to let, it has to be said, has fueled a large proportion of the housing growth over the last 5 years. It has been this market that has kept the property market running. That said it has not come without a great cost to both the economy and ordinary people. I say ordinary people because it has been ordinary people buying buy to let and maybe that has been the fundamental problem.
Back in the 1980s, car auctions were primarily the domain of people from the motor trade, and to see an everyday member of the public there was a rare sight indeed. However, there began a trend for people going to these auctions in an attempt to buy a fixer upper, do a bit of work on it and sell it on for a bit of a profit. Suddenly every Tom, Dick and Harry was a car expert and the auctions were full of these people, all trying to turn a fast buck.
What really happened is that a lot of ill informed people ended up paying too much money for a heap of junk which they could do absolutely nothing with, and they ultimately lost their money which they thought they had so wisely spent. The reason for this analogy is that the same situation has arisen in the housing market. People with no real knowledge have been playing entrepreneur in the housing market, with a lot more money than it takes to buy a second hand car. Many people have paid far too much for properties, some without even seeing the house in question.
I have been buying property for over ten years professionally and I don't mean I bought my own home. I have bought quite a few buy to lets. Even with all this experience I would never buy any property without seeing it and I do not know any other professional landlord who would. So why oh why do ordinary people think they can step into this market and treat it with what can only be described as reckless neglect.
Unfortunately what has happened is as the saying goes; they have ruined it for the rest of us. The irresponsible borrowing and buying has put the lenders at risk as they are finding themselves flooded with customers who can't repay their loans, and as such, the lenders now don't want to lend to anyone. Loan to value for buy to lets has dropped recently from 85% to 75% and it is estimated that with falling property prices, this will drop even further.
All this leaves an industry in great turmoil with very little prospect of recovery. What I suggest is, I would like to see forward thinking lenders come out with a professional buy to let product for landlords that have over ten properties. These landlords have already demonstrated they can fund purchases up to now and it would mean that they could get into a market that is quite beneficial for buyers in general. In addition this type of lending would have the result of producing some buyers in the market place which would at least keep the housing market moving at a trickle which is more than it is moving at the moment.
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