The mortgage market is tightening what will happen to buy to let?
It would have to be the understatement of the decade to say that the mortgage market has seen somewhat of a change in the last few months. What was recently a rolling unstoppable machine has been well and truly stopped dead in its tracks, and now the business of giving and getting mortgages seems to have ground to a shuddering halt.
Because of the credit crisis restrictions on lending and borrowing have changed the whole lay of the land. Lending institutions are now giving far more careful consideration to whom they deem fit to lend their money to and as a result who they seem beyond consideration. Self certification is all but a thing of the past and where not long ago 100% mortgages were the norm in this present climate 80% loan to value mortgages are as far as the institutions are willing to go. And the main area that has suffered is Buy to Lets.
The area of buy to let has undoubtedly been one of the driving forces in pushing the housing market to its peak in recent years. Nevertheless, it has proven to be detrimental to both the economy and Joe Public. The reason why I say Joe Public is because it has been ordinary folk who have bought buy to lets in an effort to make an extra income, which may be the root of the problem.
Back in the 1980s, car auctions were primarily the domain of people from the motor trade, and to see an everyday member of the public there was a rare sight indeed. However, there began a trend for people going to these auctions in an attempt to buy a fixer upper, do a bit of work on it and sell it on for a bit of a profit. Suddenly every Tom, Dick and Harry was a car expert and the auctions were full of these people, all trying to turn a fast buck.
But all that happened is these people with their limited experience just got caught up in the moment and paid too much for the wrong cars and on a lot of occasions got stung. The reason I am telling this story is the exact same thing happened with buy to lets. Even though the sums of money are far greater than a couple of grand for a car the process was the same, inexperienced people playing in a market they knew nothing about. A lot of people paid too much for their properties. In some cases people with no experience were buying houses they hadn't even seen.
Personally, I have bought several properties professionally over the last 10 years, most of which have been bought as buy to lets. Even with the expertise and professional knowledge I have, I would never buy a property without first seeing and inspecting it, and I know of no self respecting professional who would. It baffles me why a non professional would step into an unknown market and think they are an instant expert.
The problem with all this is like when we were kids at school, they have ruined it for the rest of us. All these irresponsible borrowers, and yes I think it is the borrowers fault not the lenders, have exposed the lenders to risks beyond what they can handle and now they don't want to lend to any of us. Loan to values on buy to lets have reduced over the last three months from 85% to 75% and some think that this will reduce further as property prices continue to fall.
All this leaves an industry in great turmoil with very little prospect of recovery. What I suggest is, I would like to see forward thinking lenders come out with a professional buy to let product for landlords that have over ten properties. These landlords have already demonstrated they can fund purchases up to now and it would mean that they could get into a market that is quite beneficial for buyers in general. In addition this type of lending would have the result of producing some buyers in the market place which would at least keep the housing market moving at a trickle which is more than it is moving at the moment.
Because of the credit crisis restrictions on lending and borrowing have changed the whole lay of the land. Lending institutions are now giving far more careful consideration to whom they deem fit to lend their money to and as a result who they seem beyond consideration. Self certification is all but a thing of the past and where not long ago 100% mortgages were the norm in this present climate 80% loan to value mortgages are as far as the institutions are willing to go. And the main area that has suffered is Buy to Lets.
The area of buy to let has undoubtedly been one of the driving forces in pushing the housing market to its peak in recent years. Nevertheless, it has proven to be detrimental to both the economy and Joe Public. The reason why I say Joe Public is because it has been ordinary folk who have bought buy to lets in an effort to make an extra income, which may be the root of the problem.
Back in the 1980s, car auctions were primarily the domain of people from the motor trade, and to see an everyday member of the public there was a rare sight indeed. However, there began a trend for people going to these auctions in an attempt to buy a fixer upper, do a bit of work on it and sell it on for a bit of a profit. Suddenly every Tom, Dick and Harry was a car expert and the auctions were full of these people, all trying to turn a fast buck.
But all that happened is these people with their limited experience just got caught up in the moment and paid too much for the wrong cars and on a lot of occasions got stung. The reason I am telling this story is the exact same thing happened with buy to lets. Even though the sums of money are far greater than a couple of grand for a car the process was the same, inexperienced people playing in a market they knew nothing about. A lot of people paid too much for their properties. In some cases people with no experience were buying houses they hadn't even seen.
Personally, I have bought several properties professionally over the last 10 years, most of which have been bought as buy to lets. Even with the expertise and professional knowledge I have, I would never buy a property without first seeing and inspecting it, and I know of no self respecting professional who would. It baffles me why a non professional would step into an unknown market and think they are an instant expert.
The problem with all this is like when we were kids at school, they have ruined it for the rest of us. All these irresponsible borrowers, and yes I think it is the borrowers fault not the lenders, have exposed the lenders to risks beyond what they can handle and now they don't want to lend to any of us. Loan to values on buy to lets have reduced over the last three months from 85% to 75% and some think that this will reduce further as property prices continue to fall.
All this leaves an industry in great turmoil with very little prospect of recovery. What I suggest is, I would like to see forward thinking lenders come out with a professional buy to let product for landlords that have over ten properties. These landlords have already demonstrated they can fund purchases up to now and it would mean that they could get into a market that is quite beneficial for buyers in general. In addition this type of lending would have the result of producing some buyers in the market place which would at least keep the housing market moving at a trickle which is more than it is moving at the moment.
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