2018 Lending Review
Shawbrook Bank a well recognised lender in the buy to let market place who many of our clients use over the course of a financial year have commissioned a report highlighting key aspects that they believe influenced the buy to let market. Surprisingly Brexit implications don’t feature as a key focus point within the research, although they do touch upon it. Number 3 I would ask if you review this closely in my email below if you don’t get time to read the report.
Changes in mortgage tax relief
Changes in stamp duty on second home
Tightening of underwriting standard for BTL Mortgages.
Our understanding: 1. Although we have seen several investors with larger portfolios of over 10 properties decide to halt obtaining more rentals as part of the investment strategy. These investors have looked at other avenues for generating great returns or looking at offloading some of their rentals in preference of alternative types of rental generation exercises such as Houses of Multiple occupants. Or commercial property to generate multiple apartment blocks on a piece of land. Those with a small portfolio seem to be less affected and continue with their strategy of obtaining healthy yields with a strong rental portfolio.
2. The main assessment for us on this matter is being smarter and moving with the changes in the environment and government policies. This therefore means the amount you would be prepared to pay will reduce due to the added cost of stamp duty. Most investors and property buyers understand this and so shows everyone is thinking the same in respect of this.
3. With new policies on lending and affordability to manage monthly outgoings including; Buy to let mortgage payments, council tax and utility bills should their be voids in tenancy. Lenders have tightened their payout books in accordance with this and reject applications based on affordability even if a healthy yield is being made. Lenders are also taking onboard comments from MRics qualified valuers who they instruct and comment on the current condition of a property and whether they would be able to recuperate their loan if the house was repossessed. These lenders are happy to say no to properties that may prove difficult for them to sell on or those that require a large amount of refurbishment work, they also sometimes declare in their eyes the deal simply won’t work. This year we have seen these cases arise more than ever before with lenders asking clients do they understand they may only make £20,000 profit on a particular deal so are they happy to proceed. The communication and honesty has got a lot closer with these specialist lenders.
Finally to add properties with slight damp, timber or structural issues cause lenders to also be weary. In many cases they will still consider a case and proceed to offer however it depends on the scenario or recommended solution from the engineer / valuer. We have had lenders payout on a number of structural issue lending cases this year but have also had a number declined. We have also seen cases not declined for offer which had no element of structural issues.
With auction purchases we now only recommend this strategy for those who have the ability to purchase cash. As this ensures the total balance can be settled by the purchaser should a lender withdraw from paying out on any particular property due to any reason, or if the legal team are unable to meet the required deadlines.
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