Is the buy to let market killed by market restrictions?
It would have to be the understatement of the decade to say that the mortgage market has seen somewhat of a change in the last few months. What was recently a rolling unstoppable machine has been well and truly stopped dead in its tracks, and now the business of giving and getting mortgages seems to have ground to a shuddering halt.
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.
The area of buy to let has undoubtedly been one of the driving forces in pushing the housing market to its peak in recent years. Nevertheless, it has proven to be detrimental to both the economy and Joe Public. The reason why I say Joe Public is because it has been ordinary folk who have bought buy to lets in an effort to make an extra income, which may be the root of the problem.
Car auctions in the early part of the 1980s were deemed to be the bastion of the motor trade. Anyone that was not from the trade was seen as an outsider and indeed could quickly be spotted as a rube who was well out of his depth. But gradually the situation began to change and more and more people were trying their hand at spotting a bargain and tidying it up for a small profit. People from all sorts of backgrounds were giving it a go.
But all that happened is these people with their limited experience just got caught up in the moment and paid too much for the wrong cars and on a lot of occasions got stung. The reason I am telling this story is the exact same thing happened with buy to lets. Even though the sums of money are far greater than a couple of grand for a car the process was the same, inexperienced people playing in a market they knew nothing about. A lot of people paid too much for their properties. In some cases people with no experience were buying houses they hadn't even seen.
Now I have had ten years professional experience with regards to purchasing property and obviously I don't mean the house that I live in. I have been involved in the buy to let market and in all that time I have never, nor would I consider, buying a property that I had not viewed. And I would say that this would be applicable to any landlord. So what baffles me is why someone without any previous experience would deem it a sensible thing to do.
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.
So what is to become of the mortgage industry with it being in such turmoil with little sign of a way out? In my opinion, forward thinking lenders should formulate a product specifically for buy to let landlords, who already have a proven portfolio, say 10 properties or more for example, the sort of people that have a proven track record when it comes to managing properties and tenants. At the very least it would be a way of getting buyers back into the market which could help move the mortgage market as it is from a standstill, and I don't think anyone will deny that the mortgage market now needs all the help it can get.
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.
The area of buy to let has undoubtedly been one of the driving forces in pushing the housing market to its peak in recent years. Nevertheless, it has proven to be detrimental to both the economy and Joe Public. The reason why I say Joe Public is because it has been ordinary folk who have bought buy to lets in an effort to make an extra income, which may be the root of the problem.
Car auctions in the early part of the 1980s were deemed to be the bastion of the motor trade. Anyone that was not from the trade was seen as an outsider and indeed could quickly be spotted as a rube who was well out of his depth. But gradually the situation began to change and more and more people were trying their hand at spotting a bargain and tidying it up for a small profit. People from all sorts of backgrounds were giving it a go.
But all that happened is these people with their limited experience just got caught up in the moment and paid too much for the wrong cars and on a lot of occasions got stung. The reason I am telling this story is the exact same thing happened with buy to lets. Even though the sums of money are far greater than a couple of grand for a car the process was the same, inexperienced people playing in a market they knew nothing about. A lot of people paid too much for their properties. In some cases people with no experience were buying houses they hadn't even seen.
Now I have had ten years professional experience with regards to purchasing property and obviously I don't mean the house that I live in. I have been involved in the buy to let market and in all that time I have never, nor would I consider, buying a property that I had not viewed. And I would say that this would be applicable to any landlord. So what baffles me is why someone without any previous experience would deem it a sensible thing to do.
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.
So what is to become of the mortgage industry with it being in such turmoil with little sign of a way out? In my opinion, forward thinking lenders should formulate a product specifically for buy to let landlords, who already have a proven portfolio, say 10 properties or more for example, the sort of people that have a proven track record when it comes to managing properties and tenants. At the very least it would be a way of getting buyers back into the market which could help move the mortgage market as it is from a standstill, and I don't think anyone will deny that the mortgage market now needs all the help it can get.
About the Author:
Mortgage Route gives assistance help and advice on mortgages from qualified mortgage brokers coupled with free mortgage calculators and sourcing tools.
posted by Credit Counseling at
3:29 PM
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