Buy to Let Mortgage Criteria Getting Smarter, Slowly

David Lawrenson of LettingFocus.com welcomes some more sensible lending from a few high street banks and building societies in the buy to let mortgage space. About time too.

Buy to Let Mortgage Criteria Getting Smarter, Slowly

From time to time I have commented on the “Computer Says No” attitude of the big high street banks and nearly all the building societies when it comes to lending for mortgages, especially for loans for the purposes of letting property.

And I have regularly pointed out that it is clear, from their lending policies and criteria that most do not understand the private rented sector and what landlords want in terms of loans.

But nineteen years after the first newly dubbed “buy to let mortgage” was sold, maybe things are finally getting a little better. Whisper it, but perhaps buy to let mortgage criteria are getting smarter, albeit very slowly.

Barclays Bank is one high street lender which has apparently moved to consider borrowers own funds, and other sources of income when assessing a marginal buy to let mortgage application. Strewth! Maybe they even read my blog!

This is good because at LettingFocus.com we hear all too often of borrowers who may  have £1million in equity in a big buy to let portfolio valued at say £1.5m and who want to borrow just say, £40,000 on a £75,000 house, but who get refused for a variety of daft “computer says no” reasons.

At a buy to let conference only a month ago, I got taking to the chairman of a small building society. We discussed how his society could pick off neglected but profitable parts of the buy to let loans market. And a story in the “Financial Times” last weekend looked at  how other small building societies have at long last woken up to these types of opportunities too.

For years, whilst the big high street banks and building societies have been asleep and operating their often odd approach to buy to let finance, the likes of Paragon and Aldermore have been busy making hay – identifying the under-served segments of the market and making tidy profits by meeting the needs of landlords who had been turned down on the high street.

The High Street Banks Want to do Buy to Let Loan Business After All

Paragon, Aldermore and co might be facing some new competition – which is good for landlord borrowers.

But the process of change may well be a slow one. After all, the big banks and the building societies have had almost two decades and most still seem no nearer to understanding the needs of the landlord market, nor seeming to care overly much about the profits they could make by doing things smarter and better.

Our consultancy stands ready to advise those lenders who want a slice of the buy to let mortgage pie, by helping them work out the needs of the market, the risks involved and then designing suitable products.

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David Lawrenson, founder of LettingFocus also writes for property portals, speaks at property events and is 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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