Buy to Let mortgages restrictions - London

[OwlHoot]

The current low interest rates are now so priced into everything and entrenched that I can't see the BofE voluntarily raising them in the foreseeable future, despite all their blathering about a rate rise being on the cards or not far away. But that would change if their hands were forced by a rise in bond rates

Seems like Ben Bernanke (former chairman of the Federal Reserve) shares that view

2014-05-17 Bernanke Shocker: "No Rate Normalization During My Lifetime"

Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime. ..

[doodab]

Won't it be the case that cash buyers will just plug the gap anyway? London's market doesn't seem to be affected by bank lending....

I think cash is mostly at the top end. Most BTLers are mortgaged because it increases the ROI.

[OwlHoot]

Interesting that Carney said today that he didn't expect rates to rise for some time yet. Economists (i.e. sofa seated slipper wearing Financial Times readers) now expect rates to stay on hold until Q2 2015. And even then, rates will probably only rise slowly, a quarter point at a time, so we are likely to remain at historically low rates for years yet.

Buy buy buy!

The current low interest rates are now so priced into everything and entrenched that I can't see the BofE voluntarily raising them in the foreseeable future, despite all their blathering about a rate rise being on the cards or not far away. But that would change if their hands were forced by a rise in bond rates

[Martin@AS Financial]

Won't it be the case that cash buyers will just plug the gap anyway? London's market doesn't seem to be affected by bank lending....

I'm not convinced that this will be the case. It is true that there is currently a lot of money sloshing around in London but the vast majority of people still need to take out a mortgage when purchasing a BTL.

As Power Mortgages said above, there are other options such as Clydesdale but the overall choice of lenders who will work on the pay rate is going to become very limited.

[NorthWestPerm2Contr]

For all the London landlords out there, BTL mortgages are about to get significantly tougher.

The vast majority of BTL lenders use the following stress test when calculating how much to lend - loan size x 5% /12 x 125%. Thereore, to borrow say £500,000, the rent would need to be £2604pcm which is very punchy.

Barclays along with a couple of other lenders use what is known as the pay rate which is the fixed rate on offer so instead of using 5%, will use say 3.59% allowing the client to borrow a lot more. This is especially prevelant to London where rent to mortgages payments are fairly tight.

From Monday, Barclays are increasing the calculation to 5.79% which is essentially going to have a huge impact on the London BTL market as landlords are going to have to potentially put in a lot more capital upfront to make the calculation work.


Woolwich ramps up B2L affordability test | News | Mortgage Strategy

Won't it be the case that cash buyers will just plug the gap anyway? London's market doesn't seem to be affected by bank lending....

[ChimpMaster]

Interesting that Carney said today that he didn't expect rates to rise for some time yet. Economists (i.e. sofa seated slipper wearing Financial Times readers) now expect rates to stay on hold until Q2 2015. And even then, rates will probably only rise slowly, a quarter point at a time, so we are likely to remain at historically low rates for years yet.

Buy buy buy!

[DimPrawn]

Fill yer boots!

It's bricks 'n' mortar 'innit.

Kirsty taught us well.

[Power Mortgages Ltd]

Clydesdale Bank are still offering BTL mortgages based upon pay rate and they are a contractor friendly lender too so will accept contract rate annualised if you are unable to prove your income in the conventional manner (Ltd Co accounts).

They are also very competitive with their rates and have a fixed arrangement fee for their BTL mortgages regardless of the loan size. They even have an arrangement fee free product up to 75% loan to value.

However, I concur on the point that with a lot more lenders switching to an 'affordability rate' rather than the pay rate (BM Sols did this a while ago) the choice of lenders for higher level loans will become more restricted.

[Martin@AS Financial]

For all the London landlords out there, BTL mortgages are about to get significantly tougher.

The vast majority of BTL lenders use the following stress test when calculating how much to lend - loan size x 5% /12 x 125%. Thereore, to borrow say £500,000, the rent would need to be £2604pcm which is very punchy.

Barclays along with a couple of other lenders use what is known as the pay rate which is the fixed rate on offer so instead of using 5%, will use say 3.59% allowing the client to borrow a lot more. This is especially prevelant to London where rent to mortgages payments are fairly tight.

From Monday, Barclays are increasing the calculation to 5.79% which is essentially going to have a huge impact on the London BTL market as landlords are going to have to potentially put in a lot more capital upfront to make the calculation work.


Woolwich ramps up B2L affordability test | News | Mortgage Strategy