Mortgages for Business says Moneysupermarket report on Buy to Let product availability is misleading - 07.05.2009
In response to the recent Moneysupermarket.com Buy to Let product availability report, Mortgages for Business says that the amount of Buy to Let products claimed to be available 2 years ago may have been significantly overstated by as much as 38% when looking into further product detail, whilst reviewing the mortgage market.
Managing Director, David Whittaker says:
“Whilst the recent Moneysupermarket report may be accurate on a purely mathematical basis it is not until you look beneath the surface that product figures become clearer;
• In mid 2007 it became common practice for many lenders to offer the same product with two or more variations of the Rent to Interest Cover calculation but with the same headline rate- for example 5.49% fixed for 3 years with a 1% fee at 125% RTI or 1.25% with 110% RTI or 1.75% fee at 100% RTI. This could have overstated the number of products by some 750 to 1,000.
• Many sub prime lenders and smaller building societies had BTL products within their scheme criteria to attract custom but in reality many of the products simply didn’t work and attracted very little real business. At the peak this might have accounted for another 500 to 650 products.
• The increase in Rent to Interest cover (RTI) is correct but in the same time scale when underlying rates have reduced 6.5% to 4.5%, the RTI is not a particular issue.
• Deposits at 25% or more are an increase from 15% and reflect overall market conditions. When compared with mainstream residential mortgages coming down from 125% to 85% or 95% to 75% and HSBC not even offering residential products above 60%, I think BTL has not fared too badly when put in context.
• Falling rents – not what we are seeing or what valuers are reporting to us.“
“I readily concede that the loss of BBG (Mortgage Express) and the current sidelining of Paragon and Capital Home Loans is a major market loss as their product lines were popular with landlords and accounted for a significant percentage of all transactions. Just this week The Mortgage Works have reduced all their fixed rates (and SWAP rates haven’t decreased significantly in the past 2 to 3 weeks) by as much as 0.5% as well as introducing a new product for landlords entering the market for the first time.“
“Finally as most landlords mortgages revert at the end of the initial discount or fixed rate period to Bank Base Rate plus a margin or 3 month LIBOR rate plus a margin, there are many landlords whose monthly mortgage payments have reduced significantly in the last 6 months. One landlord told me the other day “rent in £700 per month, Mortgage cost out £70 per month; happy days”.“
