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  • Property-a-holics

    BTL Mortgages... Get Them While You Can

    As any keen property investor will know, the BTL mortgage market has undergone a radical upheaval along with the rest of the banking sector. Familiar names such as Paragon, Mortgage Express, Northern Rock, CHL, GMAC etc have all pulled back from the market either because they can't get funding or they have been crippled by bad debts. The effective closure of the wholesale funding markets has lead to a staggering 50% reduction in lending capacity.
    More importantly for those property investors who are still hanging in there, lending margins on BTL products are now 6x more expensive than they were at the peak of the market in summer 2007. In those heady days, you could get a BTL base rate tracker at 0.5% over base or less. Now you are doing well to get 3% over base or even more.
    They are now only 10 active BTL lenders and the more prominent lenders such as BM Solutions, C&G and The Mortgage Works are inundated with proposals. So much so, despite base rates coming DOWN, they are putting rates UP by as much as half a point to try and discourage applications and allow their limited funding stretch further.
    The other problem now for the banks is their dwindling deposit base.
    Getting 1-2% on your money in the bank is not an attractive proposition. You'd be better off going for gold bars, government bonds or indeed property, where average yields on AST investments are running at around 7.7%.
    The auctions are heaving with people looking for property bargains. Allsop sold 91% of all their lots last week and it was standing room only.
    So, if you are still buying, get your BTL mortgage sorted ASAP with a DIP from your lender and your rates booked before they go up or indeed funding disappears altogether. The way things are going, I can see private investors taking on the role of banks and lending directly to borrowers to purchase property. After all, bricks and mortar don't move and people still need somewhere to shelter!
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    Hi Adrian,
    Thanks for this. We are just trying to source a BTL mortgage at the moment and the choice is very limited. I think LTV's may drop to 70% in the near future, meaning even larger deposits required. As you say, the banks don't really want to lend so can cherry pick the best applicants, meaning a lot of people who would normally be accepted, get declined. This leaves searches on your credit rating, which can affect your ability to get finance in the future!
    I think it is imperative to work with an experienced and pro-active broker and have a really strong communication and dialogue with them to make the most of the limited products out there. I expect to speak to my broker two or three times a week to keep up to date with what is happening.
    Property is for people who take action, and windows of opportunity are closing all around us, and may not re-open for many years, if ever. So, if you want to get involved and see an opportunity, then take massive action ... but never forget the importance of cash flow and do not be seduced by the "deal" alone!
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    Just heard that, from Monday 9th March, Lloyds TSB Group are only allowing individual BTL investors a total of nine mortgages.
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    When you consider that the new Lloyds Banking Group has 30% of the UK mortgage market and their mortgage brands include Lloyds Bank, C&G, Scottish Widows, Halifax, Bank of Scotland, Intelligent Finance and BM Solutions, this is yet another significant pincer movement on the poor old property investor. It seems that if you have too many properties, you are perceived as too risky as opposed to successful and if you only have 1 or 2 you are also too risky because you are inexperienced. The happy medium seems to be 5 or 6 properties
    With base rates at1/2%, there is very little point in leaving your money in the bank. You may as well put it under the mattress! Better still, if you can obtain finance, gross yields of 6-7% are still readily available on good BTL investments. You need to remain positive even if those around you are a bit down. In a few years, we may look upon this time as the golden age of property investment.. low interest rates, good rental demand, plenty of supply, lower prices. Keep the faith!
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