Is the buy to let market killed by market restrictions?
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.
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.
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.
The problem with all this is like when we were kids at school, they have ruined it for the rest of us. All these irresponsible borrowers, and yes I think it is the borrowers fault not the lenders, have exposed the lenders to risks beyond what they can handle and now they don't want to lend to any of us. Loan to values on buy to lets have reduced over the last three months from 85% to 75% and some think that this will reduce further as property prices continue to fall.
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.
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.
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.
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.
The problem with all this is like when we were kids at school, they have ruined it for the rest of us. All these irresponsible borrowers, and yes I think it is the borrowers fault not the lenders, have exposed the lenders to risks beyond what they can handle and now they don't want to lend to any of us. Loan to values on buy to lets have reduced over the last three months from 85% to 75% and some think that this will reduce further as property prices continue to fall.
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.
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