Same Day Mortgages, Property Lease Options and Protected Bonds That Aren’t Really Protected

It was nice to see my story about next day re-mortgages (see last week’s blog) was picked up by the FT writer Claer Barrett and actually appeared on both the front page and Money section of the Weekend “Financial Times.”

Ms Barrett originally came to know me when she was doing an investigation for the FT’s sister mag, “The Investors Chronicle” into the sometimes murky world of property seminars and buy to let advice. She actually came undercover to one of my own seminars (which cost £30 not £2,000 like some of the others she had been to.)  Next LettingFocus Seminar and Networking Event

Once she realised I wore a white hat and was not in the business of selling property or finance or indeed, another course at £2,000 odd quid, she came clean, shook my hand and has been quoting us from time to time ever since.

Here is an edited summary of the FT’s article:

“The government is pursuing negligence claims against law firms that advised Bradford & Bingley on hundreds of buy-to-let loans that are facing losses. B&B, nationalised in 2008, is alleging that anti-fraud guidelines were ignored by firms that advised on “same-day remortgaging”, a practice that was promoted by (some) buy to let investment clubs at the height of the property boom.

Investors were encouraged to buy property from distressed sellers or developers that were being offered at below market value using a one-day bridging loan. Investors then remortgaged on the same day at the open market value of the property, allowing them to bank a quick profit.

B&B alleges that some solicitors failed to disclose crucial information about the deals to Mortgage Express, the arm of B&B that was the largest buy-to-let lender during the 2006 boom. The bank said an internal review highlighted a number of same-day remortgage applications that had been “unknowingly accepted” when they otherwise might have been rejected. Potential losses to B&B would include the costs of repossession if borrowers default and the shortfall on its mortgage advance, as in most cases the value of the loan far outweighs that of the property.

The UK bank said it was pursuing claims against solicitors where there had been a breach of the Council of Mortgage Lenders Handbook. It claims solicitors have a duty to supply specific information when lodging mortgage applications. A solicitor that failed to report that borrowers had acquired their properties less than six months before remortgaging, for example, would be in breach of the lending code.

“There will be many more claims of this type in the future as buy-to-let lenders struggle to find someone to blame for what looks like a lack of due diligence,” said David Lawrenson of, a private rented sector consultant.”

Thanks to the FT for allowing me to reproduce this here and look out for a  piece in the FT or Investors Chronicle this weekend or next on property lease options which will be quoting me too.

Buy to Let Battles for Life

As you may know, I’m not necessarily a cheer leader for there being more properties let out. (Oh, for the good old competition free days of the late 90s!)

But one of the things I do find amusing is the way many journalists keep finding reasons to say that private landlords are all about to sell up. (Perhaps they think those landlords who made a muck up of buying property using techniques like next day remortgages are the norm? Sorry, but they aren’t. Those that used such financial techniques are a minority and even then, many of them who did, managed to do quite well in the end  -which is more than can sometimes be said of the lenders.)

So it’s interesting that latest Council of Mortgage Lender’s figures show that buy to let mortgages are forming an ever higher proportion of mortgage loans and another survey shows that rents are going ever higher each month.

With news like that, it hardly sounds as if the private landlord is on his knees does it? Even with the ludicrously high and unjustified (by arrears rates) margins on buy to let mortgages, that sounds to me like the private landlord is in pretty rude health. But I doubt if these figures will stop the naysayers.

Protected Bond …. Or Is It

In last week’s blog I moaned about how banks and building societies were selling these “Protected” or “Guaranteed Bond” schemes under false pretences and how I had written to the PR people of one building society that I happened to visit two weeks ago.

Now I have the reply from their PR. See if you can follow the thought pattern here. (If you get bored just read the bits in bold.)  It said:

“The Society’s Protected Capital Account is a fixed term structured deposit account which is designed to offer the investor returns based upon the performance of the FTSER100 Index with the initial investment being repaid in full at the Plan Maturity Date, provided the investment is held for the full term. With the Protected Capital Account products sold by the Society the investor’s initial capital is therefore protected in the sense that, regardless of how the FTSER100 Index performs, the investor will receive their initial capital back in full provided they remain invested for the full investment term.

Feeling happier now? Thought so…. But read on as she says…..

“…… the Protected Capital Account is ultimately dependent upon the continued financial security of the Deposit Taker. For our current Protected Capital Account this is XXXX High Street Bank therefore should they fail to meet their obligations the investor could lose some or all of their investment as no additional protection or guarantee is provided by XXXX Building Society or XXX Investment Bank. Deposits into the Protected Capital Account are afforded protection under XXX High Street Banks’ participation in the Financial Services Compensation Scheme, subject to the limitations of the Scheme.”

Mmm, bet you are kind of getting worried here……There’s more. She goes on:

“ …… … ensure customers are made aware that a 100% buy viagra overnight shipping capital return guarantee is not provided, the Society takes particular care on its marketing literature and through its subsequent product sales process to highlight to the potential investor the extent of the capital protection provided by the Account.”

FSA Should Not Allow This

Got that? Well if you did, you are brighter than me. Kind of contradictory isn’t it. And another good reason why I remain an investor who prefers to invest in property letting and directly in shares instead. I just think all these opaque stock market related products are like endowment policies. Avoid the lot of them!

But seriously, how on earth does the FSA allow these building societies to make big claims about their bond being protected, when it isn’t… or is it? Who knows? This building society obviously doesn’t.


Having a Twitter page is a great way to sound off about things like “Protected Bonds That Aren’t” Here are two more from recent Tweets. See more at Our TWITTER PAGE: Twitter

1. A bugbear of mine is agents who market leasehold flats but don’t say or know how the long lease is. It’s kind of important to assess value, guys.

2) A level results – Mmmm, either the students are now geniuses or we have inflation of grades. How long before we see A** and A*** grades?

Sorry to the nation’s students. I’ll prefer to think you are all very bright geniuses and the cure for cancer, the end of carbon fuel and world peace is just round the corner. Alleluia.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO is the home of Private Rented Sector and Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold.

Services to Businesses and the Public Sector

Primarily I am a consultant to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing associations / local authorities find private landlords (private rented access schemes, local letting agency models etc.)

I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our (very occasional) group seminars.



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