At present the overwhelming majority of buy to let mortgage products are amateur landlord buy to let mortgages. In a few short years the situation has changed from one where lenders would advance a mortgage on an entire portfolio on the back of one application form to one where many lenders frown on landlords with more than three to ten properties.
Reasons For Rationing
The primary reason for this segmentation of the market is that lenders currently have less funds available than people who would wish to borrow those funds in the way of a mortgage. This is known as the ‘funding gap’ faced by UK mortgage lending institutions. As a result of this gap distributing funds is not an issue for the lenders – in fact for the near future it is unlikely that lenders will have any surplus funds.
Faced with this situation lenders can pick and choose through which channels to lend and to what types of client. It will not be a surprise to any of you that they choose to lend their lowest mortgage rates at low loan to values in prime residential areas to employed applicants with good track records both of working and paying their commitments on time.
How Has This Impacted Buy to Let
Simply put amateur landlord products distributed through the high street have taken precedence over professional landlord buy to let mortgages and commercial finance distributed through mortgage brokers. This doesn’t mean brokers are frozen out of the market, however it does mean that les brokers have the experience and contacts to assist professional clients. The flip side of this is that specialist brokers with experience, contacts and a great track record can add more value than ever.
Just because some lenders are able to fill all their order books with prime customers profitably and therefore are not willing to look further afield doesn’t mean that substantial profits aren’t available. Both professional landlords and specialist lenders combine to a situation that is extremely mutually profitable. They can’t compete with the likes of Nationwide mortgages to pick up the easy profitable residential loans to loyal customers. However margins on buy to let and especially Limited Company, HMO and other specialist investment mortgages are higher and to lenders with the right experience who can pick out the successful properties to lend on and landlords with experience to lend to the profits can be great. This means an innovative sector is re-emerging as we speak and a specialist broker can help you now.