Buy to Let Mortgage Fraud by David Lawrenson of LettingFocus.com. Plus, the case for Letting Agent Regulation.

Well what a year that was.
Not for a long time (since the Great Crash of 1929 in fact) have so many financial institutions made such a muck up of the economy.
Amazingly some bankers, such as John Varley of Barclays, think that WE still think they know enough to listen to their predictions on stuff like houses prices.
Well, I have long since stopped listening to these guys, preferring instead to look at property price fundamentals and reality.
But I’m amazed that other financial journalists report the predictions of senior execs at banks as they have proved so hopelessly inaccurate over the last few years.
And on that topic, full marks to Rosalind Renshaw writing in the Residential Landlords magazine who flagged up how wrong financial institutions were with their predictions on house prices last year.

REAL DEALS ON HOUSES AT LAST
Over the last few weeks the estate agents that I am pals with have started to contact me with real mark downs on London property.
These mark downs have at last started to make house prices in the capital look sensible (You may know from previous blogs that I have not bought in London for 5 years as I have considered prices far too silly.)
In London, I reckon we are now only about 8% away from the bottom for LEADING INDICATOR house price indices such as that from the Nationwide and Halifax (which are of course based on surveyor valuations. Expect ASKING PRICES to fall at least another 20%)
In the rest of the country there is much further for house prices to fall as reality has still to catch up in many places. For example, a close pal in Rochdale reports that asking prices there have barely budged downwards. In areas like this the correction is coming soon and anyone thinking of buying in such areas would be advised to sit on their cash for a while longer, I think.

LETTING AGENTS NEED GREATER REGULATION
This year, as I have predicted in the FT and Daily Telegraph, many new landlords will have a very negative experience of letting at the hands of a rogue letting agent. The full article is here: New Landlords Risk Financial Penalties - "Financial Times" (There is also a longer piece on all this in the pre-Christmas “Investors Chronicle” where I am quoted extensively.)
Good letting agents, of whom there are many, have long called for greater regulation of their industry.
I predict that 2009’s experience will prove that there is a really urgent need for more regulation because many “reluctant landlords” will fall foul of rogue letting agents.

PROPERTY FRAUD IN BUY TO LET
In my next blog I will look at how the buy to let boom allowed what looked like legitimate property transactions to be turned into fraud and how genuine buyers and dim mortgage lenders lost fortunes in the process.
I’ll explain exactly how the shady property deals were constructed and how some conveyancing solicitors, mortgage brokers and surveyors helped frauds to take place through negligence and incompetence.
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer, property speaker and I run this well known property letting and investment blog
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property investment advisors 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.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week.
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Landlords are smiling at lower buy to let mortgage rates by David Lawrenson of Letting Focus. Just as long as they don’t need to raise new money!

Every now and again some smarmy old wage-slave former work colleague rings me up and says something like, “Boy, you landlords must be suffering at the moment.”
I reply, “Well, if you call a huge downward hike in my borrowings, suffering, then yes, I guess I am.”
You see, things are not as bad for us wiley old landlords as many people (fed by a constant media diet of hapless novice landlords losing thousands on now worthless Thamesmead flats) like to claim they are.
Take mortgage rates for instance.
Lots of landlords, myself included, opted for Bank of England (BOE) base rate tracker mortgages. I also have some lifetime trackers – at .75% above base and .85% above BOE base for life. Oh how I recall baulking at the set up fees at the time – a whopping £650 - which of course, is a pittance of a mortgage fee in today’s terms where 2 or 3% of the loan amount is now the norm.
Quite a few of my tracker mortgage deals which weren’t for life are coming out of their “special discount periods” in 2009. But even then it won’t be so bad.
Why?
Well, many buy to let mortgage lenders said in their contracts that at the end of special discount periods, the mortgage rate would switch to a set amount above the Bank of England’s base rate.
Now, one of the biggest players in buy to let lending was the Mortgage Express. But in the case of many of the Mortgage Express’s deals it seems the default mortgage rate will be 1.75% above BOE base. And Mortgage Express was not alone in doing this either.
Now that kind of rate actually looks superb when compared to current Standard Variable Rates – which is the normal default mortgage rate for domestic residential (non buy to let) mortgages coming to the end of THEIR special discount or fixed rate period. These are typically 4% above base.

NEW MORTGAGE DEALS
The problem for us landlords – and here we are just like everyone else - is how to get new mortgage money to buy new property.
The new mortgage deals are at a margin of at least 3% above base rate even if you put in 30% equity and they come with huge “arrangement fees” too - a misnomer if ever there was one. And there are long redemption penalties to make sure you don’t walk away easily too.
And that is why, when it comes to buying property cash is king at the moment! So, if you are set on buying property now at “below market value” prices to take advantage of the credit crunch you’ll need a lot more cash to do it.

GOOD LETTING AGENTS
I was quoted last Saturday in the Daily Telegraph giving a summary of the year 2008 and my outlook for 2009. Click here to view my comments and those of other talking heads - http://propertyclub.telegraph.co.uk/Page/View/465/3
I would like to qualify my comments in “The Tory” by saying that most letting agents are very good – they do a good job and work very hard.
For those of you who have read my book you’ll know that I really save my venom for our mortgage lenders - the banks and the building societies – many of whom I think were guilty of lending recklessly on worthless new build flats from 2001 – 2005 and now not lending at all, even on good property and to good borrowers.
However, there are a few letting agents who are slapdash with your property, inclined to cut corners and with whom you have a good chance of ending up with the tenant from hell. They let down the whole industry. For more information on how to find a good letting agent, read my article on Choosing A Letting Agency
ADD A COMMENT?
Feel free to add a comment. We moderate all comments so they take a day or so to appear. If you want to view a comment, you need to click on “Link to this Post” at the bottom right of this post and then scroll down to the end of the post.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer, property speaker and I run this well known property letting and investment blog
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property investment advisors 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.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
If you are on the home page of our blog, go to the bottom of any post, and click on “LINK TO THIS POST” to bring up the page for a specific post, then hit END …and on the right you’ll see “Site feed.”
If you are already on a specific post page, just hit END and you will see the site feed.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON”
Please Contact Us button at our main site http://www.lettingfocus.com/ if you have any queries about this.