Landlords Criticise of Buy To Let Lenders

The buy-to-let market looks buoyant for 2013, with 55% of landlords planning to increase their property portfolios over the next six months.

But, according to research by specialist broker Mortgages for Business, landlords are highly critical of lenders.

76% of investors say lenders should be doing more to help them get the finance they need.

The biggest issue for landlords is lending criteria.  Almost half (45%) feel criteria should be eased, with more preference given to experienced landlords and a greater willingness to lend on more complex property types.

Over a quarter (27%) feel rates are too high, with some landlords saying that buy-to-let rates should be similar to residential mortgage rates.

Despite these criticisms, landlords remain focused on expanding their portfolios.

The research, which polled 218 investors, found most landlords want to buy straightforward residential property.

Investment in complex property is less popular, although 26% of landlords plan to purchase Houses in Multiple Occupation.

Two-thirds of landlords planning to purchase more property say they will need to refinance in order to do so.  In total, 43% of landlords say they will look to remortgage in the first half of this year.  45% of landlords questioned said that they don’t envisage growing their portfolio in the first half of 2013, however a quarter of them still plan to remortgage.

11% of the landlords who want to expand their portfolios over the next six months have said that they won’t be able to refinance because of the lack of equity and the difficulty in securing a mortgage with an LTV of more than 75%.

But according to Mortgages for Business, there is little incentive for lenders to ease their criteria while the high demand for buy-to-let mortgages more than meets their lending targets.

The research also found that nearly 40% of investors rely entirely on rental income, which illustrates the rise of the professional property investor who has no other income than rent. This is despite most buy-to-let lenders stipulating that landlords must have an additional annual income of around £20,000 to £25,000 in order to get finance.

David Whittaker, managing director at Mortgages for Business, said: “Tenant demand for residential property is ballooning thanks to the lack of mortgages available to first-time buyers.  Every month more and more would-be buyers are being forced to rent, and this is pushing up demand to astronomical levels, producing very attractive gross yields for landlords as a result.  Not surprising, then, that well over half of investors want to expand their portfolios to take advantage of these high yields. The first half of this year will see a spate of purchasing and remortgaging as landlords try to put themselves in a position to take full advantage of a buy-to-let sector which is in very good health.”

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