Recently a few of our competitors have protested at industry events that ‘non- regulated’ buy-to-let lenders are a ‘real problem’ for the industry.
Their argument appears to suggest the regulator is looking more closely at the buy-to-let sector because of the ‘damage’ non-regulated lenders are wreaking, which means tougher rules may be introduced.
Again, the suggestion is that if this greater level of regulation does not happen, an adviser could be charged with mis-selling if they give a case to a non-regulated buy-to-let lender.
If this is your train of thought it’s perhaps only a matter of time before non-regulated lenders are blamed for the heat wave, delays on the train networks and the increased price of holidays during the summer.
Why do I find this flattering?
Well Fleet Mortgages is currently the only non-regulated lender in the buy-to-let space, not as some strategic design to get around the system but because it just worked out that way.
So, as someone who has been in this sector for 20 years and has a reputation for originating very good quality buy-to-let loans – unlike many that have no such history – I find the accusation and the ‘argument’ hilarious.
I’d also like to point out that at Fleet Mortgages our strapline is ‘Lend to those who can afford it’.
In that respect we don’t kid ourselves, you or anyone reviewing the market that we are able to lend based on dodgy modelling to borrowers with poor credit history.
Our average interest cover ratio (ICR) is 156% at stressed rate and we have an Equifax Risk Navigator score of 482 against the UK average of 380.
End in tears
Ironically, given the recent competitor comments, I do feel there is currently lending in the buy-to-let sector that will end in tears, but it isn’t being undertaken by Fleet Mortgages.
Then again, what do I know? I remember being told emphatically by a couple of very large lenders in 2006 that I was too stupid to understand why 125% LTV on a residential home loan was ‘good lending’.
For the record, and to underscore our lending and its quality, Fleet Mortgages has nearly 6,000 mortgage loans with nil arrears – quite exceptional.
We securitise on the capital markets which means we have scrutiny from rating agencies and very clever investors in mortgage backed securities who know good loans when they see them.
In one respect I agree with some of the comments: the regulator is looking at the market but this is due to the switch from two- to five-year products as a way of circumventing the Prudential Regulation Authority (PRA) rules and by using personal income to support (i.e. lower) the ICR.
Let’s be clear, I know that we are not in the regulator’s sights, that we won’t be responsible for harsher PRA intervention.