Look out, a Buy-to-Let Price War Has Started!

Buy to Let lenders have started adjusting their lending criteria as the long awaited buy-to-let price war hots up. Lenders, including The Coventry Building Society, have recently announced changes to their rental calculations. A few short years ago rental cover of between 130% to 150% was the norm, now The Coventry have reduced theirs to 120% with some lenders dropping cover to just 100%.

Maximum Loan-To-Values (LTVs) are another casualty of this skirmish. There are rumours within the industry press that one lender is soon to become the first to launch a 95% LTV buy-to-let deal. So, with maximum LTVs increasing and rental cover shrinking how are these lenders going to make any money? Well if they were operating on tight profit margins then there would be scope for genuine concern. As it happens these lenders have been making considerable profits from very generous margins, so there is still plenty of room for manoeuvre.

Lenders are also starting to change are minimum income requirements for buy-to-let mortgages, which indirectly leads to more “self-cert” buy to let mortgages. As if all that was not enough, the latest survey from the Paragon Group reports that tenant demand for rental properties is at its highest rate ever, with almost a third of landlords reporting demand is on the up!

Whilst many people were focusing on the impact of the recent (and unexpected) interest rate increase there was one other piece of news. The Association of Residential Letting Agents (ARLA) and the National Association of Estate Agents (NAEA) are to merge to create the National Federation of Property Professionals. The two bodies have joined forces to create a single organisation focused on supporting the property professional.

[tags]buy to let[/tags]

2 responses to “Look out, a Buy-to-Let Price War Has Started!”

  1. Michael, That is a very good question! There are many commentators who are concerned about this high level of lending. I will update this blog when the product is launched and let you know what the details are.

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