Lending Criteria Relaxed for Buy to Let

by Mark Johnston

Rather than the house price appreciation that lured property investors during the “boom”, it is now the prospect of rising rental income that is providing the attraction.

According to the Council Mortgage Lenders (CML) mortgages given to private landlords jumped 16% to £3.8 billion in the third quarter of 2011.

It seems many buy to let investors have taken advantage of weak prices and strong rental returns over the past year and are returning to the marketplace to expand portfolios.

Statistics from LSL property services have shown that rental prices have increased by almost £50 a month since 2008 and this of course is very appealing to buy to let investors.

This rise comes as more potential home buyers are forced in to rental properties,this is due to difficulties raising large deposits now needed and also the lack of mortgage availability for many in this current climate.

As the retail market has seen a boom and house prices have generally remained stagnant, lenders have again began expanding deals in this particular sector.

According to property website, Rightmove, there are nearly 3 times more buy to let mortgage products available now than 2 years ago.

Competition is the buy to let mortgage market has intensified, as Yorkshire Building Society have announced a relaxation in their lending restrictions for buy to let investors.

This particular lender only entered into the buy to let market in August 11, they offered products through Accord mortgages. However these products were only available in London and the South East.

The Yorkshire Building Society has now announced it intends to role out their products across England and Wales. The changes to its buy to let criteria to include dropping the minimum required property value from £150,000 to £100,000 and also reducing the minimum income on applicant needs to earn, from £35,000 to £20,000.

It has also decided to cut the inimum age of applicants by 5 years, from 30 to 25 years.

Jeremy Law, head of buy to let at Yorkshire Building Society stated that ,”we do not see ourselves as dipping in and out of the market, we are very much here to stay and will be an active lender in the market all year round.

Other experts have suggested that this particular move represents the lenders next step is its staged entry in to the buy to let market.

Platform, a part of the Co-op Bank has also said it will be lending at least £600 million in buy to let loans in 2012, this it said was due to incertaints in the wider housing market fuelling rental demand.

With new deals and relaxed lending criteria it seems landlords and letting agents could be set for another bumper year.

The Paragon Group, a buy to let lender,suggests that “landlords are expecting tenant demand to increase further this year”.

Nigel Terrington, chief executive of Paragon Group also added “with the success of 2011 to build on, I believe the private rented sector will continue to perform and provide a valuable tenure choice for even more people in 2012”.

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