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Unbiased buy to let, property investment and letting coaching, mentoring, advice and seminars for landlords from top selling property author and media commentator.

Buy to Mortgage Rates Deviod of Competition as Lloyds and Nationwide Clean up says Letting Focus

Whilst a little bit of competition is slowly creeping into residential mortgage lending for owner occupation, buy to let mortgage rates and fees are still as high as ever and showing no signs of coming down.
No surprise there because buy to let mortgage lending is now dominated by Lloyds Group (now the lucky owners of the old Halifax Bank of Scotland brands) and Nationwide (via the Mortgage Works brand) and they are keeping rates high.
There is hardly any competition that they face so they can charge pretty well what they like.
It means buying property with a buy to let mortgage is still very expensive, even despite the low BOE base rate.
We are now typically seeing mortgage fees of at least 3% and a margin over base of around 4%. Maximum loan to values are 75%.
Hopefully competition will come soon, but as usual the other mainstream lenders (the likes of Woowlch and the Chelsea BS) are all too terrified to be in buy to let mortgaes just at the time when they perhaps should be lending.
But surely, they could afford to lend up to 75% loan to value without any undue risk.
The centralised lenders – the likes of Paragon - who require wholesale funds to re-lend to Joe Public are not lending new money because the market for wholesale money has died along with the credit crunch and it will be a very long time until it starts again.

All this is blowing away deals that were doable 3 years ago out of the water, unless you are a landlord who is really gung ho about capital growth and happy to put up with low or even negative cash flow in the interim.
Of course, if you don’t need a mortgage for cash to buy, you are sitting very pretty right now.
As Lloyds and Nationwide are heavily dominant in buy to let, they are cleaning up (and no doubt making a healthy profit too) that should easily outwieght the minimal risk they can be taking if the borrower is putting up 25% of the equity.
I would say that this could be a good time to buy Lloyds shares but after the disaster of Lloyds’ purchase of HBOS, I’m not saying you should even go there.

Linked to all this talk about mortgage rates, you really should occasionally stress test the financing of your buy to let portfolio – even if you only have one or two properties.
Adjust the numbers on a spreadsheet and see how your income from your properties would look if mortgage rates were to go up.
Find out at what point (what rate) you would actually be losing money on your portfolio.

Following on from a recent blog post, I see in the excellent “Letting Update” journal published by The Letting Centre that a landlord in Acton is making hay having bought a property in Acton for £1.2 million and letting for £144,000 a year - all rent paid for by the LHA.
A tidy yield of 12% gross I think.
This is a good example of the daftness of the way the Rent Service sets LHA rates.
Here it is a high rate because it is worked out on the BMRA rate for the whole of Westminster, a considerably more expensive area overall than Acton.
The same thing applies in mnay areas where BMRA are too widely defined.
Well done that landlord for sniffing out a good deal but what a waste of taxpayers’ money. The people in government and in the Valuation Office and Rent Service who set this up should answer some tough questions from said taxpayers.
To find information on local housing allowance rates and areas, go to this website and follow the prompts under "Find your LHA" at https://lha-direct.voa.gov.uk/
To find great buy to let mortgages, try Mortgagesforbusiness.co.uk. Click on http://www.lettingfocusbtl.co.uk/ and quote LettingFocus for their special offer of £250 brokerage on buy to let mortgages - set up especially for us.
Click on Local Housing Allowance to read up more on how LHA works.
I’m David Lawrenson of LettingFocus.com - the landlord experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investment Book. The new edition is for accidental and experienced landlords and is fully up to date with all the recent changes to tenancy deposit schemes, landlord registration and capital gains taxes.
I’m a property expert and property speaker - and I run the well known property blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting to anyone looking to buy property for themselves or to let.
What’s unique about lettingfocus.com is that we offer independent unbiased advice on letting property 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.
For landlords' insurance products such as rent guarantee cover and property insurance click on Ukinsurancenet. Don't forget to quote our reference code, LFOC, to get the best rates from them too. And find out about OTHER great deals we have arranged at our Property Affiliate page.
More will be added over the next month, once we have checked them out.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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