Mortgages and Estate Agents Plus Lloyds Banking Group’s Strange New Buy to Let Lending Policy
Lloyds Banking Group has just announced it will no longer be offering new buy to let mortgage loans to landlords who have more than three properties or who have more than £2m worth of loans. This move will also hit buy-to-let investors that are remortgaging their current properties.
Apparently, nine out of 10 of buy-to-let borrowers with Lloyds (which includes BM Solutions) have less than three properties with the group. A spokesman told me, “We’ve never been a provider for borrowers with massive portfolios,” she said.
Well, with policies like this, Lloyds clearly has no desire to help their successful landlords grow bigger either.
So that now leaves just one big player in the buy-to-let market – The Mortgage Works, which is part of Nationwide Building Society. OK, I know there are a few other small players but most of the others are all pretty well hamstrung when it comes to new lending by the freeze in the money markets. And as The Mortgage Works probably won’t want all the new business, landlords can only expect buy to let mortgage rates (which are already high relative to standard residential rates) to go up even more.
(As an aside, we have said before at this blog that the high rates on buy to let loans compared to standard residential can be explained better by lack of competition than by worse arrears rates.)
Just the other week I wrote on this blog about some landlord friends of ours who have a few million in equity in their properties, 10 years experience as landlords, an overall loan to value ratio overall of about 50% and an annual profit of around £65K from their property business. They were turned down for a loan on a new property because it seems that Woolwich (part of Barclays) no longer likes to lend to full time landlords.
And now Lloyds Banking Group would clearly now be out of the picture too for these people.
I find this all pretty baffling. I simply cannot understand why the UK banks would rather lend to the more novice and inexperienced landlord than to professional landlords with a long proven track record of success, strong incomes and high equity. I haven’t seen the stats, but I do know from people I meet that the more experienced bigger landlords are always better risks and would exhibit lower arrears rates.
I fully accept that there is some danger to lenders if a big landlord has a high loan to value across his portfolio. But the banks can easily weed out applicants like these.
What’s probably happened is that someone high up at these banks has issued an edict saying they don’t want to be exposed to any individual for more than a certain amount of money – and that has been passed on and down the line. They also probably just lump buy to let in with other more risky lending like sub prime and self cert mortgages.
But in doing this they did not stop to think that the fact they can control the amount of exposure they have to any one individual’s specific property actually makes their risk fully controllable with respect to the specific asset on which the loan sits.
Bank of China and the Post Office are two new lenders who aren’t stuck for funds to lend though both have a low profile in buy to let despite some decent rates (though LTV is limited with BOC).
This move by Lloyds will surely have these competitors excited. I hope so because otherwise the options are limited for borrowers.
Rogue Estate Agents and Mortgage Mischief
Estate agents love to try to force you to use their “independent” mortgage adviser. Indeed, all too often they refuse to put an offer forward until you have had your finances “reviewed” by their mortgage adviser, or in some cases they may even say that if there are two offers on a property they will only push the offer that has arranged via a mortgage thats been taken out through them.
Let’s be clear. Any estate agent that is a member of a professional body like the National Association of Estate Agents is duty bound to put all offers forward to the vendor, and must confirm the offer in writing to both buyer and seller. And it does not matter whether you have spoken to their mortgage adviser or not.
Of course, being vetted by the agent’s mortgage adviser can have advantages for you. For a start the agent can confirm to the vendor that you have spoken to their adviser, and that you are a credible buyer, regardless of whether you arranged your mortgage through them. This puts your offer in a very positive light, which is of obvious benefit to you.
But if you have your mortgage agreed in principle elsewhere, you should tell the agent and be prepared to show them proof of this, together with any deposit.
But never feel forced into arranging your mortgage through the agent just to secure the property. Most agents are straight but there are some who will not play fair. These rogues tot up the lost commission from the mortgage and that from the sale, compare it to the other applicant who did take out a mortgage with them and “forget” to put forward your offer. If you think that has happened to you then you must formally complain to the estate agent’s governing body.
MORE ABOUT LETTINGFOCUS AND WHAT WE DO
LettingFocus.com 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 in build to let and insurers – helping them with their landlord facing or buy to let product strategies, marketing 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.
AT OUR WEBSITE LETTINGFOCUS.COM:
TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog
You can also use the tags and categories at the bottom of each post to read blog posts on related posts or click on the categories pull down menu over to the top right. (If you want to find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog – Categories, then search from the list for a topic that interests you.)
THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
For general info on our CONSULTING SERVICES and also to find a small sample of links to articles where our comments have been featured in the National Press please click here: Consultancy and Seminars
For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Mentoring
NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors (which now take place just once or twice a year): Next Property Investment Seminar and Networking Event
We have OFFERS on a few services and products here: Services and Products for Landlords
TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials
BUY “SUCCESSFUL PROPERTY LETTING” click here to Buy the Book at Amazon plus anything else at that Amazon sell. (If you are from an organisation and would like to bulk buy at least 50 books please ask us for special rates (which are lower than Amazon)).
To JOIN our Free QUARTERLY NEWSLETTER simply send an email to [email protected] – Please note we WILL NOT send spam or sell our mailing list to advertisers but please put us on your “white list” to ensure you receive our emails!
IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE?
IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME. PLEASE GET IN TOUCH!
This blog is updated once a week, usually on a Monday or Tuesday.
For my random thoughts on property and various other things that typically make me grumpy, please see our TWITTER PAGE: Twitter
Copyright of Blog: David Lawrenson 2010.