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The devil’s in the detail with BTL risk

by: Paul Clampin
  • 30/10/2012
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The devil’s in the detail with BTL risk
Mortgage lenders have been making the headlines over the past few weeks. Whilst never far from the public gaze we have seen a huge amount of discussion recently about the levels of lending and also coverage around the funding for lending scheme.

It is easy to get swept up in the chatter but I believe as an industry we need to ensure that our focus remains on really understanding and assessing both risk and affordability.

The market crash in 2007 highlighted a number of weaknesses in the application of credit criteria by some lenders and a lack of responsible lending by others. However, the buy-to-let mortgage market has worked hard over the course of past five years to improve its reputation and ensure that processes and procedures are more stringent.

There are still areas that need to reviewed though, such as ensuring that the level of underwriting is adequate and good quality. It is essential that the landlord’s full background is understood and his or her exposure to the wider property market.

It is important to build a clear picture of the competence of the applicant as a landlord and that a challenging affordability assessment is appropriately stressed. Finally, ensuring that a robust and thorough assessment of any property is carried out increases our own security as the lender but also that of the landlord as it checks the property as a letting proposition.

In order to move the buy-to-let industry forward in the coming months we need to collectively ensure that the appropriate quality checks are in place and that landlords are making investments that will work in the long term.

Those new to the market place – whether they are a lender or landlord – need to make sure that they are up to speed with the latest market developments and develop a detailed understanding of how the market operates.

Paul Clampin is the director of underwriting for Paragon Mortgages


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