LandlordZONE has canvassed many of the key lenders and brokers and discovered that the specialist needs of HMO lending – including the need for physical valuations – is making lending to landlords difficult.
The HMO mortgage market looks set to be on the verge of disappearing completely as many lenders, faced with difficult physical valuations, are now withdrawing ranges.
Landlords will struggle to get finance after main players including Aldermore, The Mortgage Works and Kensington temporarily paused applications.
“Hundreds of mortgage products of all types have been pulled since this crisis struck, many in the past few days,” says Angus Stewart, chief executive of Property Master, who adds that lenders are finding it hard to price risk in the current environment; the risk of tenants not paying rents and the knock-on risk of landlords struggling to meet their loan repayments.
Also, there’s the additional risk to lenders of falling house prices to factor in.
Stewart tells LandlordZONE: “It’s also proving to be impossible to carry out physical valuations and that’s affecting the market, particularly the HMO sector.
“Other trends we’re seeing are big reductions in Loans To Value and sharp drops in maximum loans. Overall, lenders are concentrating on existing business and are reluctant to write new business.”
With HMOs being a much more specialist area of lending, where the individual property plays such a significant role within the underwriting process, Carl Share, director of Just Mortgage Brokers, says it’s no great surprise that this is the stance lenders are taking and believes it will likely mean that for now this part of the mortgage market disappears completely.
He tells LandlordZONE: “These are not decisions lenders are making lightly and they appreciate the difficulties it may bring to some, however it’s anticipated that things will start to relax as soon as practically and physically possible as they will all wish to return to business as normal.”
A spokesperson for Aldermore, the leading challenger bank in this market, also told us: “Due to physical valuations becoming difficult, with many in the valuation sector rightly isolating at this time, we have in general moved towards remote valuations for owner-occupied properties and buy to let single unit applications.
“Where remote valuations are not possible, we are currently working through how this can be remedied so applications on other types of properties, including HMO/MUF, those with more than 2.5 acres, and properties in poor/derelict condition, have been put on hold for now until new processes can be created for them.”