Why have mortgage companies tightened lending on buy to let?
There were some interesting bits of news from the weekend financial press.
First off is the fact that Alliance & Leicester is to restrict lending on new build flats to 70% loan to value amid continuing concerns that prices of new build are falling in many areas and there is a big oversupply problem -too many flats and too few tenants causing landlords who have bought into these places to struggle with falling rents and capitals values.
Those who came to see me speak over the last few years will be well aware that I’ve warned of a big problem to come with identikit flats. Well, now it’s here!
Second, Paragon’s shares were under pressure last week. Paragon is one of the biggest buy to let mortgage lenders. Formerly, known as National Home Loans, they struggled in the credit crises of 1989-1990, when they had to be bailed out. Just as in 1989, they still raise nearly all their money from the money markets -so this really is a case of history repeating itself.
Third, mortgage lenders’ continued tightening of lending criteria in the buy to let market has led RICS to say that buy to let will be a rich man’s game from now on.
I don’t think it’s that bad, but if you have not been in buy to let before you are going to have to find at least 20% of the value of a property – and probably 25% from your own funds from now and for a little while.
So, yes it will get harder for the novice.
But if you are a new to buy to let and you don’t have at least 20% to put in, please don’t be tempted to listen to all the guff about “gifted discounts” on new build and bridging loans to buy below market value – if you do, you are only asking for trouble further down the line.
Sorry to say, but if you cannot really afford to get in, don’t play the game.
If you need more advice on property investment or buying property below market value in general, please ask me.
I’m David Lawrenson from landlord mentoring firm http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on buy to let and a well known property speaker and I contribute to newspapers and a host of property websites, write a property investment blog and run a property mentoring service.
My business is now increasingly focused on providing consulting help to banks, building societies, housing associations and web portals to help them with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, property seminar programme at my website http://www.lettingfocus.com/
My next London property invesment networking meeting is in March. Click here for details: Property Investment Seminar
What’s unique about lettingfocus.com is that we offer independent property investment help because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.
First off is the fact that Alliance & Leicester is to restrict lending on new build flats to 70% loan to value amid continuing concerns that prices of new build are falling in many areas and there is a big oversupply problem -too many flats and too few tenants causing landlords who have bought into these places to struggle with falling rents and capitals values.
Those who came to see me speak over the last few years will be well aware that I’ve warned of a big problem to come with identikit flats. Well, now it’s here!
Second, Paragon’s shares were under pressure last week. Paragon is one of the biggest buy to let mortgage lenders. Formerly, known as National Home Loans, they struggled in the credit crises of 1989-1990, when they had to be bailed out. Just as in 1989, they still raise nearly all their money from the money markets -so this really is a case of history repeating itself.
Third, mortgage lenders’ continued tightening of lending criteria in the buy to let market has led RICS to say that buy to let will be a rich man’s game from now on.
I don’t think it’s that bad, but if you have not been in buy to let before you are going to have to find at least 20% of the value of a property – and probably 25% from your own funds from now and for a little while.
So, yes it will get harder for the novice.
But if you are a new to buy to let and you don’t have at least 20% to put in, please don’t be tempted to listen to all the guff about “gifted discounts” on new build and bridging loans to buy below market value – if you do, you are only asking for trouble further down the line.
Sorry to say, but if you cannot really afford to get in, don’t play the game.
If you need more advice on property investment or buying property below market value in general, please ask me.
I’m David Lawrenson from landlord mentoring firm http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on buy to let and a well known property speaker and I contribute to newspapers and a host of property websites, write a property investment blog and run a property mentoring service.
My business is now increasingly focused on providing consulting help to banks, building societies, housing associations and web portals to help them with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, property seminar programme at my website http://www.lettingfocus.com/
My next London property invesment networking meeting is in March. Click here for details: Property Investment Seminar
What’s unique about lettingfocus.com is that we offer independent property investment help because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.
This entry was posted by lettingfocus, on
Monday, November 26, 2007.
