Buy to let lending restrictions hamper landlord borrowing. However, quality funding lines are well and truly open to landlords with substantial cash or equity reserves. Learn how to find out who’s lending but not advertising the factMake Text Bigger
The buy to let mortgage market is in a state of flux as key lenders have changed their criteria over recent weeks.
This weekend, Lloyds Bank effectively shut up shop to portfolio landlords with more than three properties.
From close of business Friday (September 24), the bank reshuffled buy to let mortgage products and lending criteria for wholly owned brands Cheltenham & Gloucester (C&G) and BM Solutions.
Now, buy to let loans are capped by Lloyds at £2 million per person with security of no more than three properties.
This rule applies to new mortgages and remortgages – meaning many Lloyds customers with loans already exceeding the threshold are trapped in to remortgaging elsewhere to raise funds or change rates.
Lloyds was the largest buy to let funder with a 60% market share before changing criteria.
Meanwhile, The Mortgage Works (TMW) – a Nationwide subsidiary – has stepped up to fill the void in the market left by Lloyds by increasing buy to let lending options.
For instance, TMW lending criteria is aimed at soaking up investment from the over 50s by letting loan terms run until the borrower is 90-years-old. This allows anyone up to the age of 65 take on property investment over a 25-year loan term.
Other smaller buy to let lenders have products on the market, but effectively, Lloyds and TMW take the lion’s share of the sector.
Many other brands popular with landlord mortgages closed their lending books during the credit crunch as funds for borrowing dried up.
Big name lenders like Paragon Mortgages were one of the first to withdraw from the market, as they could no longer raise money to lend on the wholesale markets. However, they have re-entered the market and are targeting larger portfolio operators with low gearing.
Buy to let revolves around lenders raising cash through borrowing on these bank-to-lender markets. The credit crunch effectively closed this source of cash to non-deposit taking lenders as they exhausted security to give against loans to pass on to landlords.
A ‘deposit taking’ financial institution is a bank or building society that takes in savings and investments. This cash flow is seen as good security by the financial institution lending the cash.
‘Non deposit taking’ lenders, with no savers depositing cash, raised money by securitisation – putting up their existing loan book as security to borrow more cash.
Now more than ever before the role of a competent broker is critical. Commercial lenders and private banks are also keen to fund quality portfolio’s and developments but they can’t be found on mortgage sourcing systems or generally advertising their products. They operate through quality brokers with whom they’ve developed close working relationships over a number of years.
There is no doubt that the current state of the property market makes it’s a good time to buy for those in a position to do so. With ‘no money down’ schemes having been effectively outlawed the market is ripe for people who’ve created a war chest and cash reserves, and indeed those with substantial equity in their portfolio’s to take advantage of the buyers market.
Our aim is to refer all landlords meeting the above criteria to the right ‘partners’.
For further information please call our Customer Care Team on 01603 894525.
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