9:09 AM, 20th October 2011, About 10 years ago 2
Buy to let insiders have revealed some home truths behind the property business in an online video for mortgage brokers.
The key speaker was Paul Howard, head of the Nationwide’s specialist accounts, which includes major landlord lender The Mortgage Works (TMW)
The video debate was hosted by trade magazine Mortgage Solutions, bringing Howard together mortgage brokers and an independent adviser. He said he expects to see a continuing and growing demand for buy to let mortgages.
“I expect buy to let to grow to 20%, maybe 25% of all broker business,” he said. “The market is very significant and the trend has already started. More people need to rent and this demand is driving more demand for buy to let.”
He explained that landlord mortgages are likely to grow 40% this year – from £10 billion of lending in 2010 to £14 billion.
The reason is margins on lending – Howard highlighted that mortgage lenders can make bigger profits on lending the same amount of money to landlords rather than other homeowners.
“Buy to let margins are a lot more attractive than residential lending,” he said. “Lender’s criteria will soften, tighter margins will give landlords better pricing.”
He went on to explain why landlord lenders charge such high fees.
“Buy to let fees are misunderstood,” he said. “Higher fees give borrowers lower interest rates and improves cash flow for a landlord. High fees also make the rent cover calculation work better.”
Howard then discussed how the cost of a high fee/low rate mortgage is similar to a no fee/high rate loan – but 90% of TMW customers opt for the higher fee product because the lower mortgage rate gives them better cash flow.
“Low rate, low fee mortgages are not going to happen,” he said. “The lender won’t make a profit from these loans and buy to let mortgage rates are higher because lenders are not paying the Bank of England base rate for their money.”
The debate also covered mortgage regulation, which Howard spoke out against.
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