As we move towards Christmas and things are getting quieter on the market it seemed like a good time to reflect on the types of applicant Buy To Let Lenders will be targeting in 2012. Lenders are quickly falling into three camps. Those who want to cater for high earners and those who want to pick up business from professional landlords. The ‘core’ market of small time landlords who fall into neither category and have up to three properties remains relatively well supported.NatWest has long had a very stringent rental calculator at 125% of 6.75%. We’ve discussed at some length the benefits of taking a fixed rate buy to let now and avoid future high variable rates so I won’t repeat those messages again here. It’s worth noting that for many amateur landlords finding a property that can meet this stringent test is much safer – future rates will be higher and we want to ensure rent is more than sufficient. Having said that not everyone’s motives are short term profit on the rental income.
Higher earners with under three properties can now access NatWest products with a 100% calculation at 7%. This is a huge decrease in the amount of rental cover they would require to allow a deal to go through. Higher earners traditionally have better performing buy to let mortgages as they are able to make the payments during any rental voids or dips in rental yield. They also can take a longer view about when to sell their properties or how long to wait to find the ideal long term tenant. This increased flexibility means that although the property will be a higher risk as a standalone issue for NatWest the overall risk is significantly reduced by the status of the applicants.
A number of lenders are starting to look to experienced landlords as a safer option. Aldermore for example now will waive their minimum income requirement (usually £20,000 which is in line with most other lenders except The Mortgage Works who require no income for home owners or experienced landlords) for applicants who can demonstrate a suitable level of experience. Lenders are currently keen to avoid the mistakes of the past and understanding specific niches of the market is likely to lead to more of this kind of specialisation from lenders trying to pick up good risks that the others haven’t targeted yet.
This is well demonstrated by both Paragon and Aldermore Commercial, both of whom have an exciting range of specialist buy to let products for experienced landlords looking for limited company buy to let and HMO mortgages. With Paragon there are none of the low portfolio limits (BM Solutions for example only allow landlords to purchase 3 properties with the Bank) allowing experienced landlords to accumulate significantly more property assets while interest rates and market conditions are favourable.
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