Archive for the ‘Buy to Let Mortgages’ Category

Applying on a Buy to Let Mortgage for a House you Intend to Live In

Monday, April 7th, 2014

David Lawrenson of LettingFocus.com explains why more borrowers will try to “game” mortgage lenders by applying on buy to let mortgages for loans on properties that they intend to live in themselves.

One of the likely outcomes of the Mortgage Market Review (MMR), which now applies to all residential loans, is that getting a mortgage for residential mortgages might prove that little bit harder.

MMR requires lenders to see more proof of affordability than ever – so cue more potentially intrusive questions to ascertain what you are spending your money on and whether you can really afford the mortgage loan.

So, whilst 90% loan to value mortgages are available (though at stonkingly high margins over Bank of England Base), the MMR is just another factor which means you may not get that level of loan after all.

Buy to let mortgages, however, are not covered by MMR – and nor are they regulated like residential loans are (which is one of the reasons the FCA decided to hang borrowers out to dry when they let West Bromwich Building Society and other lenders scandalously renege on their tracker mortgage commitments).

And though lenders still need to do their checks on borrowers who apply for buy to let mortgages, there is often not a minimum personal income requirement in place.

Nevertheless, there will be lots of other reasons why a lender will reject or scale back a buy to let mortgage application, but the two main restrictors on buy to let will usually be the loan to values (usually the limit for most lenders is 75%) and the rent to income ratio (usually the rent must be at least 25% more than the interest payments on the mortgage at a notionally defined interest rate, which today is typically set at 5% or 6%).

The rent to income ratio requirement often means that in practice most buy to let loans come in at well below the 75% loan to value level, leaving borrowers often needing to often quite a lot more than 25% of the property value as a cash “deposit”.

“Gaming” the Mortgage Lenders

Still, there are plenty of people out there who have at least 25% of the value of a property to put down, but who don’t have, or cannot show, the necessary level of income to get any residential loan. Many of these will be the self-employed, who perhaps cannot formally evidence the income required by the lenders.

Given that buy to let mortgages are often not that more expensive than residential, there will be many borrowers who will apply for a buy to let mortgage, knowing full well that they intend to live in the property.

This, of course, is a breach of the mortgage terms and conditions and, if the lender finds out, the consequences for the borrowers can be very serious indeed.

So mortgage lenders are now being very careful and we know from our corporate consulting work for lenders that the smarter ones employ a battery of checks to identify and stop this kind of thing from happening.

Still, borrowers will inevitably try to “game” the system. Some borrowers will argue that the lender does not really care and won’t investigate too hard, just as long as the mortgage is being paid. And after all, isn’t the lender getting a higher interest rate than they would get if the mortgage was a residential loan?

Unfortunately, this kind of thinking, which you may hear at the more spammy property seminars, can be very dangerous.

Major Risks

The reality is that there are real risks in cheating mortgage lenders. One of the most significant of all would occur if the borrower was to suffer a total loss following an insured event. In this case, the insurer would find out that the loan type was wrong and the claim would almost certainly be rejected. Plus, the borrower would have to pay back the entire loan to the lender – not easy when the property lies smoldering and in ruins.

So, we advise borrowers to never try to “game” lenders by applying on a buy to let loan and then living in the property.

And if you move back into a property that has a buy to let loan on it, always tell the lender, even if it just for a few months*

Remember, on buy to let loans, the lenders are not the “Mr. Nice Guys” that they are supposed to be on residential mortgages. There is no forbearance in the event of non-payment of the mortgage loan. And as we have seen from the antics of West Bromwich, Skipton and Manchester Building Societies and the Bank of Ireland, they are not even prepared to honour mortgage contracts.

So, do you still think the risk is worth taking?

* It would of course help matters if lenders did not make excessive charges for giving “consent to let” or “consent to not let” where borrowers wish to change the use of a property from being their own home to being a let property, or visa versa.

ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers.

We help them develop and improve their services and products for private landlords.

David Lawrenson, founder of LettingFocus also writes for property portals, speaks at property events and is regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

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Our New Newsletter Is Out in January… and a Word About Ethics in the Business of Being a Landlord

Friday, December 20th, 2013

We are now closing for the Christmas and New Year break. However, our still free, new quarterly newsletter will go out in the first or second week of January, so look out for this and remember to put our email address, david@lettingfocus.com in your whitelist to ensure you receive it. If you don’t already get the newsletter but would like to receive it, just send me an email.

The new newsletter will look at a number of issues – in particular the issue of ethics and how “fair dealing” (for tenants and for anyone you buy property or landlords services from) should always be a part of what all landlords do. I also look at how fair dealing and fair contracts should be uppermost in the minds of landlord advisors as well as those public and private organisations who sell products and services to landlords and property investors.

I will look at how what we at LettingFocus.com do for landlords contrasts sharply with the “financial freedom” and “get rich quick” lobby, whose main role in life seems to be to get financially unsophisticated people to pay out for expensive seminars and courses to learn about the latest spammy technique to make money in property, often using unproven techniques and unethical, often illegal practices.

At LettingFocus, at our seminars and one to one sessions with landlord and investor clients, we only use proven techniques that actually work and which are legal and fair to tenants. (Click the links below to find out more).

LettingFocus also works with organisations that provide products and services for landlords or who are otherwise engaged with the private rented sector. Our clients include local authorities, housing associations, property portals, insurers, service provides, investors in private rented stock and others.

However, here too, we will not get involved as a consultant, in any work that we think is not in the public interest. And we are not shy of taking a public position if we feel any large organisation, which should know better, is involved in dealings that are blatantly unfair and wrong.

CROSS BOROUGH LANDLORD LICENSING

For example, we are not convinced that whole borough landlord licensing can ever really be justified as being in the public interest.

Most housing practitioners in the councils themselves are also against these schemes (see a recent blog we did on this following our meeting at “AHAS”) and the only reason some other boroughs want to copy Newham’s scheme seems to be for councillors and some housing directors own political reasons. (There are votes for councillors and mayors in “bashing landlords” and having a big team of staff and a new, big budget at the council office usually leads to higher pay for the housing directors in charge).

We regard such schemes as usually a wasteful, untargeted and wholly ineffective way of finding and dealing with rogue landlords – and they lead to higher rents and a breakdown in the relationship between councils and the majority of local landlords, who are usually trying to do the right thing.

I know that other consultants are happy to take the council shilling to work on mapping out and implementing cross borough schemes. We will not, as in all the cases we have seen thus far, they are unjustified, wasteful and counter-productive. There are far better targeted approaches the councils could use to drive the rogue landlords out for good, whilst as the same time improving what the majority of landlords are already doing.

Recently, we have criticised mortgage lenders attempts to wriggle out of valid base rate tracker mortgage deals. Attempts by some lenders to do this are an outrageous assault on the businesses of landlords and are utterly unjustified by the mortgage contracts the lenders entered into.

BASE RATE TRACKER CHEATING BY SOME MORTGAGE LENDERS

LettingFocus consultancy has actively advised some lenders on their mortgage business in the past. However, I find the moves to try to wriggle out of tracker mortgages by some banks and building societies quite astonishing. And, in recent weeks, I have not shied away from public criticism of this.

What I find especially distasteful is that the lenders case looks so weak that we can only presume that they must have hoped that landlords would be unable to raise the necessary organisational and financial firepower to take them on in what would ultimately be a high court case. (The hopeless regulator seems unable to act, though some political pressure is growing). This rather all smacks of bullying by the lender.

Fortunately, it looks like the lenders may be mistaken on the assumption that landlords will just roll over, because after similar moves by Skipton and Manchester Building Societies and the Bank of Ireland, went unchallenged, landlords are finally fighting back against the latest move (by the West Bromwich Building Society). (Property118 are leading a campaign and will shortly start a class action. I support them, as should any landlord who holds any base rate tracker mortgage with any lender, as they could well be next).

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ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers.

We help them develop and improve their services and products for private landlords.

We also write for property portals, speak at property events and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

HOME PAGE OF THIS BLOG: Blog

THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com

For general information on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice

CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING”

Our book is the highest selling personal finance and property book in the UK. Click here to Find Out More and Buy it.

If you are from an organisation and would like to bulk buy, please ask us for special rates.

TO JOIN OUR FREE NEWSLETTER Mailing which goes to over 3,500 people (as at Jan 2013) just send an email to david@LettingFocus.com

We do not spam or sell our mailing list to advertisers, though we occasionally mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.

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Mortgage Tracker Rates Open Letter to Andrew Tyrie MP

Thursday, November 28th, 2013

In this letter to Andrew Tyrie MP I ask him to take action to stop mortgage lenders cheating their buy to let Bank of England (BOE) mortgage tracker rate customers by invoking small print terms in separate documents that were never meant to apply to BOE tracker loans. I have highlighted this by illustrating from my own personal experience with these mortgages. These mortgages are tracker rate mortgages NOT standard variable rate (SVRs) mortgages, yet the lenders are trying to treat them like SVRs

To Mr. Andrew Tyrie MP
Chairman of the Treasury Select Committee
House of Commons London SW1A 0AA
Andrew.Tyrie.mp@parliament.uk

From David Lawrenson
Founder LettingFocus.com

28th November 2013

Dear Mr. Tyrie,

Why You Must Act In Relation to Unfair Rises on Buy to Let Mortgage Tracker Rates

I am writing with reference to the activities of the Bank of Ireland (BoI) and the West Bromwich Building Society (WBBS) in relation specifically to Bank of England (BOE) base rate tracker buy to let mortgages – a topic which I know you are familiar with from your comments in the media. (You may also be aware of similar issues in the past in relation to the Skipton and the Manchester Building Societies).

I would be grateful if you could carefully read my letter – which urges you to take action to stop mortgage lenders who are trying to wriggle out of their commitments on BOE tracker mortgages.

Before I turn to the meat of the issue, may I please give you some background on myself, which may prove useful.

I am David Lawrenson. In the public eye, I am probably best known as the author of the book, “Successful Property Letting” which has sold 55,000 copies since it came out in 2005 and which, since its launch, has consistently been the UK’s top selling book in the “property and real estate” genre. It is now into its fourth edition.

In addition, at my site www.LettingFocus.com, I am also a noted and respected commentator on issues affecting private landlords and the private rented sector (PRS) in general.

I speak widely to many different interest groups as an expert on the PRS and just within the last year I have given evidence to the Housing and Regeneration Group on the PRS at the London Assembly. I have spoken to the Council of Mortgage Lenders at their Buy to Let conference and to national conferences of the Institute of Housing.

Within my consultancy business I advise both private landlords as well as organisations too. I have advised private companies, including mortgage lenders and in the public space I have helped local authorities and housing associations too.

Each day, over 1,500 people read my website or blog and I have an opt in mailing list of over 5,000 people which includes not just landlords but also a wide range of personnel from organisations that seek a relationship with the private rented sector as well as MPs and other interested parties.

I am a portfolio landlord who lets property mainly in South East London.

In my work as an independent expert on the private rented sector, I am also viewed as a person who advocates improvement in the private rented sector and fair dealings in the property letting business. My views often, but not always, coincide with those of the landlords associations.

For example, for many years I, along with housing charity Shelter, strongly argued against the views of most mortgage lenders, who generally still have a policy of not allowing landlords to let to people who are on housing benefit or to let their properties on fixed terms of more than 12 months.

Following my evidence on this to the London Assembly in December 2012, the Nationwide and Lloyds Banking Groups both performed U-turns on these restrictions. (I had argued that such blanket restrictions applied for all landlords did not even make economic sense for the lenders themselves, though perhaps some limited restrictions on tenancy length were merited for the smaller, less experienced landlords).

I hope this background on myself is useful as I would like to now turn to the point of this letter – which is about what I see as unfair behaviour by the two lenders in question. I would like to add that I do not have a mortgage with any of WBBS, BoI, Skipton or Manchester Building Societies.

As you will know, WBBS recently followed the BOI in invoking small print clauses that were always and clearly meant to apply to standard variable rate mortgages to try to hike the margin over the BOE base rate. The lenders are trying to treat these mortgages as if they were standard variable rate mortgages, which is what they most certainly aren’t and were never intended to be.

Their argument seems to be that these “small print items” could somehow overrule all their marketing documentation and all the information in the main mortgage terms and conditions which their borrowers had signed.

It is clear from my own postbag, from meeting landlords at my seminar events and from the work of Property118 (who have hopes of organising a class legal action) that every single landlord who took out one of these lifetime tracker mortgages believed that they were getting a tracker mortgage that would follow the BOE base rate at a set margin. (This set margin would either apply from the outset of when the mortgage was taken out, or would “follow on” from the end of an initial time period when the mortgage rate may have been at a set high fixed rate).

I would like to turn now to my own personal experience as I think it reflects very much the experiences of many other landlord borrowers.

All my own buy to let mortgages tracks the BOE rate. I always purposely avoided any mortgage that follows the lenders’ Standard Variable Rate, unless that rate was also specifically pegged to the BOE rate for the very good reason that I do not like to give the lender a “blank cheque” to hike the interest rate to whatever interest rate it feels like charging in order to maximise its own profits.

When I took out these mortgage tracker products, I always made a very careful analysis.

Often the BOE tracker mortgages I took out were initially more expensive than other deals on offer.

For example, about 5 years ago I took out a mortgage of about £165,000 where the application fee was over £3,500 and the initial rate was set at 5% over base for a period of 3 years, after which time it then switched to a BOE rate tracker of 2% over BOE for the rest of the term of the mortgage.

At the time I took this out , there were other mortgage deals available with nil or low fees and interest rates set at very low levels for a period of a year or two. However, I did not take these out because they all then moved to the lenders’ standard variable rate. (As I mentioned before, I wanted to avoid giving the lender a blank cheque to charge me whatever they felt like).

So, like many other borrowers who took out BOE base rate trackers, I took the pain of paying a high fee initially (and in my case, also a high interest rate for 3 years) in order to benefit from a low margin over BOE rate for the rest of the term of the mortgage.

You could say that I took a bet which was to suffer some pain in the short term for a longer term of lower repayments and the certainty of knowing that my mortgage would be at the mercy of the Bank of England and not the needs for profit of a lender who could flex its standard variable rate at any time. You could say I won the bet.

For at least two other BOE tracker mortgages, I was not sent the “general terms and conditions” document where some of the lenders say these “get out clauses” reside. For one mortgage loan, I even wrote and highlighted that I had not been sent this document. Although the lender replied on other issues raised in my letter, they failed to respond on this particular point and still not have not done so to this day.

Let us now turn to the lenders in question and how these loans were presented.

In the case of WBBS, until only two weeks ago, the lender had live on its own website under “tracker mortgages” a statement that said that these tracker mortgages gave borrowers “the certainty of knowing that their mortgage would always follow the BOE base rate”.

Indeed, all the mortgage documents that the customer signed gave the clear impression that they were taking out a tracker mortgage – one that follows the BOE rate at a set margin that could not be altered.

Even if the customers had received the “general terms and conditions” document and read it in fine detail, I’m not sure that they would not have been aware that at some future point their tracker mortgage margin could ever be altered.

I contend that any borrowers’ reasonable assumption would be that this “general terms and conditions document” is just that – a general document and the terms that cover how the lender could increase the interest rate if it was faced with “funding issues” or due to “adverse competitive conditions” must surely relate to Standard Variable Rate mortgages only.

After all, these customers took out a BOE tracker – all the marketing they were sent and the information online said it was a BOE tracker. Indeed, the main mortgage document they were sent says it was a BOE base rate tracker. It was a BOE base rate tracker set at a set unalterable margin over base rate. There can be no question over this whatsoever. These were NOT standard variable rate products.

I would also note that the website property118 alleges that WBBS have singled out for this rate hike just those customers who are portfolio landlords and those who came to the lender via mortgage brokers. However, I cannot verify that here, other than to highlight that some have seen this as a cynical and possibly unfair or illegal move.

It seems that the FCA seems disinclined to act as they say that buy to let mortgages fall outside what they have responsibility for.

This seems ludicrous to us as the vast majority of customers taking out these loans are ordinary “small player” landlords who should be protected by the state. These borrowers are not the Graingers of the PRS world.

There is also the issue of overall fairness and decency here – and I am sure you are conscious of the recent alleged activities of Royal Bank of Scotland who it is said have been actively pushing customers into debt so they could then asset strip their businesses.

Put simply, Mr. Tyrie, the moves by these lenders seems to be an abuse of their power – and one which is blatantly unfair. It will lead to some landlords going out of business and to tenants losing their homes. Other landlords may survive but will have their spending power and re-investment power in further lettings severely curtailed.

I note that both WBBS and BoI are in a precarious financial position. In the case of WBBS, there is also some “past form” in relation to their past role on equity release products. And, I note their recent loss in court a case against Prideview Properties, which may have some echoes of the RBS case currently in the media.

I think the hope of these lenders is that the borrowers will be unable to raise the necessary funds to take them on and defeat them in court. This is what happened in the case of Skipton Building Society’s tracker rate hike a few years ago.

They may be right but, if so, this seems completely unfair and does suggest some element of bully boy tactics.

Indeed, going further. some landlords have told Property118’s forum that WBBS have implicitly threatened them with repossession within 28 days if they do not comply and pay the increased mortgage rate.

It is regrettable that the FCA seems either disinclined to act or has failed to understand the real issues.

So I think the time has come for you to act to put pressure on the FCA to take some action to stop mortgage lenders invoking these get out clauses, which, (if they ever existed in the first place), were not bought to the attention of borrowers and more importantly were clearly never intended to apply to BOE rate tracker mortgages.

I look forward to your response.

Yours sincerely
David Lawrenson

www.LettingFocus.com
Sidcup, Kent

ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers.

We help them develop and improve their services and products for private landlords.

We also write for property portals, speak at property events and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

HOME PAGE OF THIS BLOG: Blog

THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com

For general information on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice

CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING”

Our book is the highest selling personal finance and property book in the UK. Click here to Find Out More and Buy it.

If you are from an organisation and would like to bulk buy, please ask us for special rates.

TO JOIN OUR FREE NEWSLETTER Mailing which goes to over 3,500 people (as at Jan 2013) just send an email to david@LettingFocus.com

We do not spam or sell our mailing list to advertisers, though we occasionally mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.

OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS: Landlords Resources

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NEXT SEMINAR EVENTS FOR LANDLORDS: Landlord and Property Letting Seminar

Copyright of Blog: David Lawrenson 2013. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated roughly once a week.

TWITTER PAGE My thoughts on property, personal finance, plus a lot of other random things: Twitter

LINK TO THIS BLOG OR TO OUR WEBSITE


Thursday 28th November 2013

West Bromwich Building Society Mortgage Rate Hike

Tuesday, September 24th, 2013

David Lawrenson, private rented sector expert and director of LettingFocus.com, highlights the risks to lenders of invoking terms in the small print of mortgage contracts to hike landlords’ tracker mortgage rates.

At previous blog posts we predicted that it was likely that other lenders would follow the Bank of Ireland’s move in hiking interest rates on buy to let mortgage tracker loans, by citing clauses in the small print of their mortgage agreements. And we have been proved right. The West Bromwich Building Society has become the first to follow the Bank of Ireland, no doubt aware that the FCA does not want to get involved in these buy to let loan arrangements. And it is a move that is causing much consternation among landlords and their advisors. But we think there are real risks for the lenders who copy West Brom and Bank of Ireland’s moves.

Background

Here is some background to the story.

Back in the days before the credit crunch of 2008-9, many mortgage companies completely mis-priced their mortgage loan deals when they sold mortgage loans with lifetime tracker rates at tiny margins above Bank of England (BOE) base rates. We have seen some residential lifetime tracker mortgages that were as low as 0.3% above BOE base and buy to let lifetime trackers that were as low as 0.7% above BOE.

Mortgage lenders cannot get lots of funding to back loans over the long periods typical of an average mortgage, so most of the lenders funding comes from shorter term financial instruments and/ or customer deposits. The problem is the short term instruments are now a lot more expensive, relative to central bank base rates, than they were pre-2008. Clearly many lenders never anticipated a short term funding environment like we have today. So, facing funding rates that are so much higher, many lenders are now incurring savage losses on these tracker deals. And so the lenders have been carefully going through the small print of their past mortgage agreements to see what “wriggle out” room there might be.

On residential loans, because of much greater regulation, lenders cannot invoke a “get out clause” based on a term that was hidden away in the small print – the regulator would simply now allow it.  But in the case of buy to let – with little regulation – unfortunately, for landlords there exist some “ways out” for lenders.

Small Print

And the lenders arguments, made forcefully by West Bromwich is that as landlords are supposed to be professional business investors, they are therefore supposed to have had the gumption to read all the small print.

So lenders have started targeting the buy to let landlords, (providing of course, that their own small print allows that lender a possible way out).

But it may make some business sense for the more unscrupulous lenders. Given that private landlords tend to not get such a great press anyway, the possible public relations impact may also be limited, even if the means of doing this may appear to be more than a little questionable.

Issues for Lenders

But there are some things we think the lenders considering copying Bank of Ireland and West Brom need to consider carefully. (And also, some of these points may be issues for price comparison sites and mortgage brokers).

1. How were (and are) these mortgages actually being marketed and presented – both at the lenders and brokers sites and also at the price comparison portals? Was there any mention and clarity here (and in the lenders and brokers small print) that the “go to” lifetime margin over BOE base could be amended in this way. (It goes without saying that most borrowers claim to have assumed that the margin was set at a fixed amount of BOE base for life of the mortgage).

Amazingly, as we write, West Brom’s tracker mortgage page online is still extolling the benefits of tracker rates as a way to fix one’s mortgage for life. (No mention of any “get out” clauses there.)

2. How can a lender know or show that mortgage applicants were professionals and not amateur / accidental investors at the time when they applied for the mortgages? And related to the same point, what is the definition of amateur and professional landlord anyway? If they are deemed to be amateur landlords, and therefore possibly “consumers” – notwithstanding any FCA view on this – then there may be a case to say they should be protected by the rules on unfair contracts terms in consumer contracts. This means the lender could still be on shaky grounds if key terms such as possible hikes to the margin of mortgage rate over base rate were hidden in small print.

Indeed, there is some history here. In the case of Foxtons and unfair renewal / repeat fees charged to landlords, it was found in the highest court that many smaller time landlords were consumers and that Foxtons attempts to hide key terms in the small print acted as a “trap” to consumers and was a breach of fairness in consumer contracts. There may be parallels here. (Note, in the Foxtons case the question of exactly how many properties can be let before a landlord is deemed to no longer be a “consumer” was left open for fellow learned friends to mull over).

3. Many borrowers who are affected by these lenders moves are saying they did not even see any small print saying that the lender could up the margin over BOE base rate. Others say that the mortgage contract document they signed made no reference at all to any other document, (such as a “general terms and conditions” document), where the “get out” clause was listed. Borrowers may be able to argue that it is up to the lender to prove that the separate document was: a) in existence b) actually sent to them c) clearly, and at the time the main document was signed, somewhere clearly referring to the lender being able to increase the tracker margin.

4. If more lenders copy the Bank of Ireland and West Brom moves – and more borrowers are affected – it raises the odds that an organised legal challenge could occur. Website Property 118 has started a campaign and class action but wider support could be engendered if other lenders copy the move. Possibly, the landlords associations could even get involved too. Is it likely that other lenders could copy the Bank of Ireland and West Brom? Barclays –Woolwich is an interesting case. This lender historically had some very cheap trackers. In their case their rates on buy to let mortgages were linked to the BARCLAYS BASE rate not the Bank of England (BOE) base. For at least 10 years, this has always been same as the BOE base rate (currently 0.5%) but this still gives them a possible way out from lifetime tracker mortgage deals which are as low as 0.69% over base. However, this would mean hiking the BARCLAYS BASE rate – and this may have complications in the rest of their business. (Another lender which uses its own base rate as the “tracker marker” is NatWest). A large lender like Woolwich would seriously raise the stakes of legal action due to the much larger numbers of people affected.

Recently, we have seen paperwork of other major buy to let lenders which often have a wide set out “get out” clauses too.

In the case of the C&G and BM mortgage contracts we have seen, there is a “get out” clause in a “general terms and conditions” document but this document is not referred to at all in the main mortgage document.  The same applies for Woolwich. In the case of all four Mortgage Express cases we have seen there would appear to be no “get out” clause for the lender to use.  The same goes for Bank of China mortgages.

5. As, in many cases the “get out” clauses are in the general terms and conditions documents but not in the Key Facts document and as the general Ts and Cs are not available to borrowers until the valuation is completed and the mortgage offer is actually received or after the mortgage has started, the lenders positions would seem to also be weak.

6. Finally, and this is the key point: I think it will be obvious to many people (and probably to any judge too) that the clauses in the general terms and conditions that refer to “funding issues” and the like as a possible reason to hike rates must surely only relate to rates on standard variable rate mortgages. They will conclude that these terms were never meant to apply to trackers. After all, all the other documentation that the customer signed and all the marketing material refers to the margin over the base rate as being at a fixed margin over base.

It very much looks like the lenders, desperate for a way out of these contracts, hired lawyers who suggested the lenders use a term and condition that was never meant to apply to base rate trackers and to somehow apply these terms to the tracker mortgages.

I don’t think this argument will stand up in court so the lenders hopes must rest on borrowers being unable to get the necessary financial firepower to fight them in court. (It looks from early indications as though the FCA will not help landlords out, so court action may be the only way out for the borrowers).

Rewards and Risks

Mortgage companies will need to tread very carefully here. The rewards to lenders from hiking mortgage rates in this way are quite big. But the risks are actually quite high too. Apart from the risk of bad PR and losing an expensive court case, there is also the risk of losing customers too.

Not all landlords are big players – many could be classed as “accidental landlords” who let a property because they could not sell it. There will be some sympathy for them and for others who have just a few properties to help with retirements already decimated by the other activities of the financial services industry. Some landords will also inevitably respond by closing their sometimes substantial banking relationships with any bank that they perceive have not “played fair.” And mortgage brokers may choose to shun the same lenders in the future too. Lenders will have to tread carefully.

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We also write for property portals, speak at property events and we are regularly quoted by the media.

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We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

HOME PAGE OF THIS BLOG: Blog

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London Assembly Calls for Longer Term Tenancies

Tuesday, June 11th, 2013

At LettingFocus we are pleased to see our evidence to the London Assembly on the private rented sector was accepted and made it through as a key recommendation.

The London Assembly has issued another report on the private rented sector – this time calling for the mayor to intervene in the capital’s private rented sector to “stabilise rents” and encourage longer tenancies.

In the report published yesterday, the Assembly’s Housing and Regeneration Committee calls for a series of reforms to the capital’s private rented sector.

We have had a quick look at the report and whilst I find much in the report I don’t agree with – including “rent stabilisation” (which is actually NewSpeak for the old “rent controls” chestnut) – it’s still really pleasing that one key proposal, which came from us at LettingFocus.com, managed to make the final report and list of recommendations.

LettingFocus.com was invited to give expert evidence to the Committee back in December – along with a few other landlords’ representatives. (We must give the London Assembly credit for doing this much, because so many private rented sector conferences I see being marketed by the governments of the UK, by the housing charities and by councils have no one from the private rented sector actually speaking or even invited to attend).

A key part of our submission to the Committee was that the 12 month restriction on tenancy length imposed by most mortgage lenders along with some lenders’ “no benefit tenant rules” and RBS’s “no lending in areas of selective licences” restrictions acted to badly restrict private landlords letting activities and tenants’ housing options.

Restrictions are Not Logical

I went even further and suggested that, quite apart from the bad PR,  these types of restrictions were often not actually even justified from the business point of view of the mortgage lenders themselves.

The fact that these restrictions existed at all was (somewhat surprisingly perhaps) news to the members of the Committee, to the audience watching and to the journalists who turned up to watch the proceedings.

No Dissensions

We are delighted that this has matter been picked up and ran with – and it seems with no dissensions either. (The Conservative group added a list of dissensions at the end of the report, but they did not dissent on this important matter).

So a key recommendation has gone forward from the Committee that pressure is bought to bear on the lenders to stop these restrictions. This pressure could come from the Mayor and / or others in government.

Of course, since December, the pressure has clearly told (or a more enlightened approach has dawned among lenders) and two key lenders in the buy to let space – Lloyds Banking Group and Nationwide – earlier this year stopped their restrictions and now allow landlords to let to people on housing benefit.

Maximum twelve month tenancy length restrictions are still generally in place, though, except among a few more forward thinking lenders.

Missed Point

It is just a shame that in much of the press it has been reported that the Assembly is telling landlords to issue longer term tenancies. Most journalists have just looked at the Assembly’s rather terse and misleading press release and not bothered to read the full report, thereby completely missing the point that the Assembly is actually calling for the lenders to look at this restriction and reverse it.

Tenants want the security of longer term tenancies and many private landlords would like to be able offer them too in the right circumstances. Hopefully the proposal will be supported and all lenders can be made to eliminate these often pointless restrictions.

ABOUT LETTINGFOCUS

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We also write for property portals, speak at property events and we are regularly quoted by the media.

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We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

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When is a Tracker Mortgage Not Really a Tracker Mortgage and How More Lenders Are Giving Themselves Get-Out Clauses

Monday, June 3rd, 2013

David Lawrenson of private rent consultants, LettingFocus.com explains how mortgage lenders have now set up get out clauses within their tracker mortgage deals which are so wide that the industry could eventually be forced to stop marketing them as tracker deals.

He also predicts that the Bank of Ireland “rate hike” case will result in a victory for those landlords whose letting activities are small enough for them to be afforded protection under consumer protection rules.

Bank of Ireland (BOI) has partly backtracked on its decision to raise mortgage rates for thousands of customers who thought they were on Bank of England base rate trackers for life. The bank now says that about 1,200 homeowners will no longer be hit by the increase.

BOI has highlighted two groups of customers that will be excluded from the rise. The larger group consists of about 1,000 mortgage customers who were actively using the flexible facilities on their mortgage account. BOI says these borrowers “received a specific administrative letter linked to their transactions that might have caused them to believe the differential was for the term of their mortgage”. A smaller group has about another 200 cases affected. But that still leaves over 12,000 customers will still be hit with higher mortgage payments.

Landlord sites, Property118 and LandlordAction are looking to launch their own joint class action – and many affected borrowers have joined up with them.

Personally, I predict that Bank of Ireland will be found to have hidden an important clause in its mortgage contract and that this was a clear breach of the rules on fair contracts in relation to consumers.

Professional Landlords or Amateurs?

However, I also predict that the courts will probably make a distinction between “professional” full time buy to let landlords who would have been expected to have read the small print, and others, who as “consumers”, may not have been expected to have read all the bumpf.

In other words, I predict the judgement will follow the same outcome as the “Foxtons Case”. (In the Foxtons case, repeat letting fees were charged to landlords by many letting agents, despite the existence of such fees being hidden in small print or in separate documents. Foxtons and other letting agents lost and now have to make sure such important terms are flagged up clearly, especially to part time landlords, who could be deemed to be consumers and therefore covered by unfair contract rules).

The Woolwich and Nat West Get Out Clauses

But what has escaped the notice of most personal finance writers is that two big lenders in the buy to let space – Woolwich and Nat West – have always had lifetime trackers that actually follow their own Bank’s base rate, not the Bank of England base rate.

Over many years, these Banks’ own base rates have been exactly the same as that of the Bank of England.

Of course, if their own base rate suddenly diverged from that of the Bank of England’s, questions might be asked about what they were planning next.

Both Nat West and Woolwich owners’ Barclays will be watching the outcome of the BOI case very carefully indeed. Both issued very low lifetime tracker mortgages – many fixed at less than one percent above base rate – and therefore both will be losing a lot of fortune on these existing mortgages.

They would dearly like a way out.

If the judgement goes the way of the Bank of Ireland, I would expect Nat West and Woolwich to raise their own base rates and “financially duff up” their own borrowers who, no doubt, will have thought they were safely on a Bank of England base rate tracker deal. These borrowers will be in for a shock.

BM Solutions and Others Lenders Get Out Clauses

But they may not be the only lenders looking for a way out.

We recently saw a new BM Solutions buy to let Bank of England base rate lifetime tracker mortgage offer where, within the small print, the way appeared to be open for the lender to renege on the tracker for a host of reasons, including changed “competitive conditions” and “funding environments”.

Of course, if these myriad “get out” clauses are to be allowed (which may well depend, in part, on the eventual rulings in the BOI case), then the next question the lending industry may have to answer is how such mortgages can be allowed to be marketed as lifetime tracker rates in the first place.

In the meantime, buy to let mortgage customers – especially those who are deemed to not be consumers by dint of the extent of their landlord activities – should proceed with caution and carefully check the small print on mortgage offers very carefully.

ABOUT LETTINGFOCUS

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We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers.

We help them develop and improve their services and products for private landlords.

We also write for property portals, speak at property events and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

HOME PAGE OF THIS BLOG: Blog

THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com

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Bank of Ireland Mortgage Move Destroys Trust

Wednesday, March 20th, 2013

David Lawrenson of www.LettingFocus.com says the move to hike rates on some Bristol and West Tracker Mortgages looks wrong – and destroys confidence in all lenders.

When I speak to people who want to sell services to private landlords (which includes organisations like local authorities and housing associations that desperately need private rented sector landlords to make their houses available to people who have few housing options) the suppliers sometimes ask me “What do private landlords really want from us, the suppliers to the sector”

Well, two things always come to mind.

Communicate What You Offer

First, private landlords need to know what products and services are out there – what do you, the supplier offer? In the case of local authorities, most landlords do not know what the councils can offer them because most have failed to adopt a proper marketing programme online to tell them.

Be Fair

Second, they want fairness in the products and services that are being sold. They do not want to feel they have been misled or confused, whether deliberately by a supplier, or because of poor communication.

Bank of Ireland (BOI) is a good case study of the latter. Private landlords who took out Bristol and West Bank of England base rate tracker mortgage products thought they were getting a base tracker for life.

But alas, it seems there was a clause in the small print that allowed BOI to significantly up the rate in the event of special circumstances (e.g. in the general economy) applying. They have now applied this clause.

Much discussion is now taking place about whether they can do this – including whether doing so is a breach of Unfair Consumer Contract Terms rules and whether it is allowable if such an important clause was not clearly bought to the attention of landlords when they signed up for these mortgages. (Landlords, or at least, most of them are still consumers who are taxed like consumers, and who already won a similar case when Lord Justice Mann ruled in the high court against Foxtons and the unfairness of their repeat letting fees which were hidden in small print).

Class Action

A class action to fight BOIs move has been launched – check online for details.

I guess BOI will have consulted its lawyers about whether their move would stand up in court and they would have been encouraged that another lender, Skipton got away with a similar kind of move some years ago.

However, whatever the outcome, it reeks of unfairness and private landlords and those brokers who advise them will not easily forget this.

In the short term, all landlords should now carefully check the small print in their mortgage terms for both current and future mortgages.

I have always opted for Bank of England base rate trackers, and so have most of my associates. A quick check of the T&Cs in these reveals that, for our loans at least, The Woolwich, C&G, BM Solutions, Mortgage Express and Bank of China, are all stuck with continuing to lend to us on low Bank of England Tracker rates. They have no wriggle room at all and no special clauses to invoke. Thank goodness for that.

Nevertheless, this move by BOI lessens trust in all mortgage lenders at a time when trust in financial services organisations is very low – something that the Council of Mortgage Lenders ought to be concerned about.

Budget

Finally, there was not much in the budget today except for “Help to Buy” and a new mortgage guarantee that will help some people get onto the housing ladder or move up on it, but will likely just push up house prices even more. Sadly, apart from this, there was nothing much new on unlocking housing supply.

ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. We also write for property portals, speak at property events and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

HOME PAGE OF THIS BLOG: Blog

THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com

For general information on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice

CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING”

Our book is the highest selling property book in the UK. Click here to Find Out More and Buy it at Amazon. If you are from an organisation and would like to bulk buy, please ask us for special rates.

TO JOIN OUR FREE NEWSLETTER Mailing which goes to over 3,500 people (as at Jan 2013) just send an email to david@LettingFocus.com

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Mortgage Loans and Housing Benefit and Why a Selective Approach is the Better Option

Wednesday, March 13th, 2013

David Lawrenson of www.LettingFocus.com observes the latest mortgage lender U turn on allowing landlords to let to housing benefit tenants, but says that rather than a “blanket” approach of either allowing or not allowing landlords to do this, a better way would be if lenders “selectively” allowed it – with the decision linked to other variables such as landlord experience and loan to value level. Lenders should also provide more information to landlords.

In last weeks blog, I reported how Nationwide had removed their somewhat short-lived restriction preventing landlords letting their properties to tenants on housing benefit.

The Nationwide move was quickly followed by Lloyds Bank who also abandoned their identical (and rather more long standing) restrictions on those landlords who have loans from their BM Solutions buy to let unit.

Following these lender moves, I received quite a few emails from people in government, housing associations, tenants groups and the media congratulating me on making this restriction more widely known publicly – and leading to these two lenders abandoning the restriction.

One said, “People at the bottom of the housing ladder who find very few landlords will let to them anyway, will today have more housing options, thanks to you.”

It’s quite likely that my talk to the Council of Mortgage Lender’s conference some 14 months ago (as well as my appearance and evidence to the members of the London Assembly’s PRS committee) will have had a part to play in these lenders’ decisions. The media, especially “The Guardian” newspaper and the “Mortgage Strategy” magazine may have done the rest.

A little clarification is required though – because I did not set out to be a kind of “hero of the people” on this issue. Indeed, my work often involves advising mortgage lenders on how to make more of a success (in other words make more profit) from their buy to let mortgage products.

Profitable Market

My position has always been that mortgage lenders should have always allowed some landlords to let to people who are on housing benefit, not just because it is good PR to do so, but because not to do so eliminates a profitable niche market from the landlord and lender.

However, the government’s changes to welfare entitlements over the last 2 years and especially, the looming roll out of the Universal Credit system has made letting to people on housing benefits a lot more risky for landlords than it was before (and hence also for their lenders).

That is why my advice to lenders is yes, you should still allow landlords to let to people on housing benefit (and naturally you will get some good press and hopefully also, even some kudos from government from allowing this). But given the welfare changes that are happening, and the consequential increased risk, it might be better if your underwriting approach allowed only more experienced landlords to do such lets or linked the ability to do HB lets with only those mortgages where the loan to value was lower than the normal level. This would allow lenders to control the risk.  Another way would be to require landlords to have a guarantor for some housing benefit lets.

By allowing all landlords to let to any benefit tenant, these lenders have possibly gone from the frying pan into the fire a little.

Going forward, our view is that as long as the government continues with its current plans for Universal Credit, we would recommend that lenders pursue a more selective approach.

Lenders Lack Control Over What Landlords Do

Of course, the reality is that lenders don’t have much control on what landlords do. Every day hundreds of tenants in the private rented sector will suffer changed circumstances, need to go onto housing benefit and most won’t tell the landlord – most don’t have to and most won’t anyway. And of course a lender will never ask a landlord to end a tenancy where this has happened (for the very practical reason that the PR impact would be dreadful – and rightly so).

So lender control is rather limited anyway, which is why we say that lenders should also provide more helpful advice online to landlords to allow them to manage their lets better or point them to where they could get this advice. Few do this.

David Lawrenson’s book “Successful Property Letting – How to Make Money in Buy to Let” is the UK’s highest selling personal finance book and is a practical guide for landlords.

ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. We also write for property portals, speak at property events and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

HOME PAGE OF THIS BLOG: Blog

THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com

For general information on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice

CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING”

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TO JOIN OUR FREE NEWSLETTER Mailing which goes to over 3,500 people (as at Jan 2013) just send an email to david@LettingFocus.com

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Nationwide Mortgage Works Housing Benefit U Turn

Wednesday, March 6th, 2013

David Lawrenson of Private Rented Sector Consultants LettingFocus.com looks at why some mortgage lenders don’t want to allow landlords to let to tenants who are dependent on housing benefit to pay their rent.

Last week, at this blog, I looked at Nationwide’s new policy (for the Mortgage Works) to not allow landlords taking out mortgages or remortgages with them to let their properties to tenants who are on housing benefit.

The story also appeared in a lot of the specialist and mainstream press last week, where the policy was criticised by some.

Then, on Friday, Nationwide did a sudden about turn and said it was allowing landlords to do theses types of lets after all.

We cannot speculate on the reasons behind the change of policy, though we think it unlikely that the government put any pressure on Nationwide. After all, part state owned Lloyds Banking Group and Yorkshire Building Society still have similar restrictions in place. (In my blog piece I had said that Nationwide’s move could be seen as an indictment of the government’s welfare changes, specifically the numerous changes around Housing Benefit/ Local Housing Allowance).

Lenders Concerns

So, why are lenders worried about landlords doing these sorts of lets?

One of the issues some lenders say they have is around a receivership / recovery situation (i.e. where a landlord has defaulted on the mortgage loan and a receiver of rent has been appointed) and where a tenant on housing benefit is still in situ.

The issues the lenders have in such situations are these:

1) establishing what rent is due (if any) and from whom
2) getting that rent paid direct to them (if over 2 months arrears) or immediately if other relevant tenant vulnerabilities exist and
3) concerns that Housing Benefit depts can claim back overpayments of Housing Benefit years later.

At LettingFocus, we think a sensible level of co-operation between lenders, their appointed receivers of rent and the department that pays out housing benefit would solve a lot of these issues. But the mortgage lenders do not seem to be talking to the government to try to solve these issues, and the government seems confused and unable to take the lead either.

This is why we said there seems to be something of a “lack of grip” on the private rented sector by government agencies at present.

Over-reaction

Are the lenders overreacting with such blanket restrictions?

We think they may be.

For example, one would question where is the real risk of a financial hit to the lender in cases of loans where the landlords’ loan to value was low, say at less than 60%.

If lenders have concerns about the three issues highlighted here and if there is a lack of will to solve them, then, in the interim, they could always look to selectively restrict loan to values on buy to let loans for housing benefit lets or make them dependent on other more “positive” variables.

But a blanket restriction such as YBS and state owned Lloyds Bank’s BM Solutions have on new landlords letting to HB tenants seems, to us at least, to be not necessary and clearly not ideal in the current housing crisis, where those dependent on housing benefit are already finding very few landlords will accept them.

ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. We also write for property portals, speak at property events and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

HOME PAGE OF THIS BLOG: Blog

THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com

For general information on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice

CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING”

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The Impact of Landlord Regulation on Buy to Let Mortgage Terms, Conditions and Availability

Thursday, February 7th, 2013

Many buy to let mortgage lenders are still not “ahead of the curve” in terms of understanding the impact of legal and regulatory changes in the private rented sector – and this often leaves their own businesses exposed to losses, says David Lawrenson of private rented consultancy, www.LettingFocus.com

In an interesting piece in Joanne Atkin’s “Mortgage Finance Gazette”, Paul Walshe of Moore Blatch observes that mortgage lenders have done little to protect their own interests and that of their buy-to-let borrowers against a rising tide of complex legislation and potential arrears and possessions claims. He says, “Lenders should be doing more to protect themselves and support the army of amateur landlords, those with just one property, whose number is now approaching one million”.

Mr. Walshe advises lenders to establish better processes for checking that landlords have complied with all the legislative requirements in dealing with tenants in arrears. To facilitate this, he suggests that lenders could set up panels of approved suppliers who specialise in tenancy repossessions to cut the timescale for repossessions and therefore minimise the losses to landlords and potentially, (in a landlord loan default case), the lender.

I think this is potentially a good idea too and it is an action that we always recommend to the mortgage lenders whom we advise in our consultancy work.

More Legislation – Impact on Mortgage Lenders

For a long time, at LettingFocus, we have been saying that mortgage lenders could and should do a lot more to advise landlords of what their legal responsibilities are. But most of them, especially some banks and building societies for whom buy to let is just one line of business, still have a long way to go.

This is rather worrying because the amount of legislation that landlords have to comply with has increased markedly since the advent of the buy to let mortgage in 1996.

One especially important piece of legislation and regulation is that which exists around tenancy deposits for assured shorthold tenancies. Failing to protect a deposit could lead to a fine and a longer wait to achieve possession – which will often lead to an increase in the potential losses a lender faces, in the event of landlord default on their mortgage.

Selective Licensing – What Should Lenders Responses Be

The penalties a landlord faces for not complying with selective licensing requirements are stiffer still. £20,000 in fact.

The London Borough of Newham has already put a selective licensing system in place covering all privately let properties in the borough. And until five years or so have passed and we know of these schemes work or not, (see last weeks’ blog post for more of my views on this!), we can only expect more local authorities to jump on the bandwagon and try to set up their own schemes. (Licensing schemes are a bit of a job creation opportunities in straitened times – financed by landlords, but really paid for by tenants in terms of increased rents. Expect more of them!).

Some mortgage lenders, like RBS, have reacted to landlord licensing by seemingly red lining buy to let loans in places where licensing is in place.

This is an interesting move in itself given that RBS is a part state owned bank – but it is one that ought to also be worrying for Newham’s high profile mayor, Sir Robin Wales. (Newham landlords have always argued that licensing could cut supply of stock in the private rented sector in Newham, though few foresaw that it would be the lenders who would turn “frit”*) .

Inform the Landlords but Cut LTVs

A different approach, which is what we recommend for most lenders, would be for mortgage lenders to write to landlords with properties in places where licensing has been applied, to ensure they know that they have to meet their obligation to register for a licence and to tell them they face heavy penalties if they don’t.

We also suggest they may want to review their loans to value levels in these locales too. I will not be popular with Sir Robin Wales for suggesting lenders do this, but it is another unintended (and possibly unforeseen) consequence of landlords licensing.

*Frit – that great Lincolnshire word once popularised by Margaret Thatcher.

ABOUT LETTINGFOCUS

Services to Businesses and the Public Sector

We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. We also write for property portals, speak at property events and we are regularly quoted by the media.

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk.

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Our book is the highest selling property book in the UK. Click here to Find Out More and Buy it at Amazon. If you are from an organisation and would like to bulk buy, please ask us for special rates.

TO JOIN OUR FREE NEWSLETTER Mailing which goes to over 3,500 people (as at Jan 2013) just send an email to david@LettingFocus.com

We do not spam or sell our mailing list to advertisers, though we occasionally mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.

OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS: Landlords Resources

PERUSE LAST TEN BLOGS BY GETTING THE RSS FEED: Click Here

NEXT SEMINAR EVENTS FOR LANDLORDS: Landlord and Property Letting Seminar

Copyright of Blog: David Lawrenson 2013. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated once a week.

TWITTER PAGE Thoughts on property, personal finance, plus a lot of other random things: Twitter

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