Tighter criteria on buy to let from lenders
January 27, 2009
According to recent reports lenders are tightening their criteria when it comes to buy to let mortgages, and this means that existing and potential investors that have been hoping to benefit from the falling house prices and plummeting interest rates will most likely experience problems when it comes to getting the finance that they need.
One buy to let lenders, The Mortgage Works, has recently stated that it will be refusing applications from property developers, which could mean that many potential buy to let borrowers end up losing out.
Another High Street lender, Abbey, has also made changes to its lending when it comes to buy to let, and wants buy to let borrowers to show that rental income will cover 125 percent of repayments.
The rate of interest will be set at 7 percent. Officials have said that this sends out a message that the lender no longer wants to take on buy to let business.
One official stated: “Abbey is sending out a clear message that landlords are no longer welcome. By refusing to offer any new or remortgage buy-to-let deals, and implementing draconian rental covenants for those taking out a residential mortgage who have buy-to-lets in the background, it is making itself very unattractive to anyone with buy-to-let property.”
The interest rates that are charged on buy to let mortgages are usually around 1.5 percent higher than those on standard mortgages, and there are also various fees that would be landlords will have to deal with.
In addition to this, lenders have been demanding higher deposits on both buy to let and residential mortgages, so many hoping to get into the buy to let sector whilst interest rates and house prices are down may find things difficult.
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