New BTL trends- interest rates.LTV

[landlord mortgages]

I would like to get views on the new trends in buy to let; for example:-

Borrowing to 90% instead of 85%

100% rental cover instead of 125%

low remortgage rates ie. Lifetime trackers at Base+0.28% and 3yr fixed at 4.99%

Low rates with high fees...do they put you off even though the overall cost of comparison makes them best buy

Views and discussions would be great

Lee

[P.Pilcher]

Lee - from posts I have made on your own board, you know I tend to be very cynical about the senior, faceless men behind the scenes who set the lending rules for the big lenders as they seem to live in ivory towers with little connection with the real world. As far as I can see they just make up rules out of the top of their heads to regulate the flow of lending money out of their organisations to the optimum rate to suit them.
To give you an example, I owned my own house outright, but had the opportunity to acquire a "nice little earner" about three years ago. A broker (regrettably not your firm) put me in touch with the Halifax and I used my own house to secure a loan of about a quarter of the established value of the property. After two years the interest rate was due to skyrocket so I looked for another lender. In the high street, the Nationwide were obviously in the market as their advertised rate was attractive, furthermore as I had a savings account with them, and have done so for many years, their mortgage advisor was keen to lend. So he filled up all the forms with enthusiasm, but when he learned that I owned other houses outright from which I was receiving a rental income (my income - what's different about it?) I was told that he was prevented from offering me a mortgage. He agreed that it was crazy and he would try his best to plead my case with his bosses. I never heard from him again.
It is only in the last few years that BTL mortgages have become generally available. Before this, such mortgages were a "no no" - in other words they had to be commercial ones on which the interest charged was way beyond what a market rent would support. About two years ago I remember my bank manager (LloydsTSB) ruefully telling me that the bank's policy was not to offer BTL mortgages, furthermore I was assured that their "faceless ones" were eying the large portfolios their competitors held of such loans which showed a much lower default rate than personal mortgages. As you know, Cheltenham and Gloucester, LloydsTSB's mortgage arm now offer BTL mortgages! You see, once one lender "breaks ranks" over the established principles, the rest are obliged to follow like lemmings or they fear that they will miss out and some do (ha ha).
Do you remember that immediately before all financial institutions started to fall over themselves to offer us loans galore, they decided to lend their surplus money in the third world. One started it, then the remainder followed suit. Of course they all caught a big cold as some of the said countries said "thank you very much" and many refused to repay their loans. Thus the institutions directed their largesse in our direction as they were more likely to get their loans repaid and high interest theron.
So, to finally get to your point - the lenders would appear to have relaxed the conditions necessary before they will grant a BTL mortgage. There is only one reason for this - they have surplus money that they want to invest so they are relaxing the rules. If you and your customers can benefit from this then good for you and them. I am sure you will carefully consider your customers' plans before recommending a mortgage to them on the new relaxed terms. I still have memories of thirty years ago when I wanted my first mortgage - I had to virtually kiss the ground on which the Building Society manager walked, be a saver with the society concerned and get my Bank manager to "call in a favour" before I could borrow a measley £8500. I was a salaried teacher to boot and a first time buyer!
Yersterday, I applied on the internet to a lender for a £10,000 loan at 5.6% over 5 years. The paperwork offering me the money was received today and my bank manager is still struggling to get his interest rate for a similar sum below 10%!

Ho Hum.

P.P.

[landlord mortgages]

Hi Pilcher, great post...would like to use it for our own website....a good account....let me know if we can?


In reply:-

I keep telling journalist's the same thing....don't do the deal until the deal stacks....I urge all my landlords to look for a minimum yield of 6% to property value....however if they can get more of their money back (or keep more) ie. 90% LTV then thats great IF they can make money by borrowing money.

Make money by borrowing money:-

We don't mean off plan on over inflated prices we mean those that buy cheap second hand properties (cheap because they need work, seller needs a quick sale...etc).

Lee

[P.Pilcher]

Lee - I've PM's you. However I cannot reiterate your words of wisdom more throughly! I scrounged just over £100,000 from the Halifax on an interest only basis. Of course they tried and tried to get me to take out some investment or other to enable me to pay back the loan when it matured! The one thing that they couldn't grasp was that the investment I had made to ensure I could pay it back was a house!! Thanks to them letting me have access to £100,000 of their money, I have now made about £40000 for me (and B**** Gordon) - oh and after deducting my interest only mortgage payment I receive a further £140 every month from my tenant.

P.P.