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Todays article has been supplied by Bobbie Harvey of E.J.D. Mortgages Ltd….

BTL Mortgage Market December 2010…. 

Like the rest of the market, the buy- to-let sector has suffered in the wake of the credit crunch. Last year there were only 93,500 buy-to-let mortgages taken out worth £8.5bn compared to 346,000 in 2007 with a value of £44.6bn. But latest figures show an improving trend.   

When the credit crunch hit there were only a small number of lenders continuing to lend through some tough times, but this year we have seen new lenders come into the marketplace, such as Aldermore and Precise Mortgages.  Paragon Mortgages has returned to lending after its exile in 2008 and Abbey for Intermediaries revealing this month that it’s looking at entering the amateur landlord market next year. This is a sign that buy-to-let is back.

At the same time, demand for rental property is growing. The number of new tenants looking for rental accommodation has jumped by 44% in 2010.  First Time Buyers struggling to raise a deposit to buy a house are also faced with tougher credit scoring, which means they have no alternative but to rent, and in the wake of the Spending Review and the cuts in social housing, the expectation is that increasing numbers of social housing tenants will migrate to the private rental sector.

So what is out there in the buy-to-let market? The majority of lenders have a maximum Loan To Value (LTV) of 75%, although The Mortgage Works (TMW) will consider lending up to 80%, but the higher the LTV the higher the credit score needed.  Birmingham Midshires (BMS) have set a minimum purchase price of just £40,000, however they will only allow you 3 mortgages in the Lloyds Banking Group*.  TMW, on the other hand, allow unlimited number of mortgages up to a value of £1.5m (at 80%). 

Historically, BTL lenders weren’t interested in personal income and mortgages were purely assessed on rental income.  This has changed in recent times and not only are lenders requiring  a minimum income (typically £25,000) but this income has to be proven to the lenders satisfaction. TMW has decided not to go down this route and will lend to someone with no personal income at all, the only stipulation is that the client must be a property owner and not renting.

I see 2011 as being very positive for the buy-to-let market.  The introduction of new lenders brings more competition and with demand for rental properties increasing, rental yields can only increase.  A recent survey conducted by LSL Property Services showed Landlords’ confidence is increasing, with 48% of them thinking now is a good time to invest in property.

*Lloyds Banking Group includes BMS, Halifax, Bank of Scotland, TMB, IF, C&G, Lloyds TSB, Lloyds TSB Scotland and Scottish Widows



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