As part of Mortgage Solutions‘ buy-to-let week Aldermore managing director Charles Haresnape was live on the site to answer your questions on the buy-to-let market.
Mortgage Solutions:
Good afternoon and welcome to our buy-to-let webchat with Aldermore managing director Charles Haresnape. Charles will be here for the next hour answering all your buy-to-let related questions.
Charles Haresnape:
Charles here from Aldermore and I would be delighted to receive any questions on BTL.
Mortgage Solutions:
We’ll start with some questions submitted via email. Our first question for Charles is: “The buy-to-let market is dominated by two major players in BM Solutions and The Mortgage Works; do you think this is healthy?”
Charles Haresnape:
Historically this was true but increasingly new lenders see this market as an expanding sector and can offer different criteria and solutions to assist all sectors of the buy to let market. I think this trend will increase during this year.
Mortgage Solutions:
Another question on a similar theme submitted via email: “We have heard rumblings of several existing buy-to-let lenders making a big push in this market this year, what do you see happening?”
Charles Haresnape:
I think they will be keen to do more in the market. But I think other lenders will be keen to take a bigger share by taking advantage of criteria opportunities underserved by some lenders e.g. HMO and limited company lending.
Question from Johnny:
I have four buy-to-let properties/mortgages I would like to consolidate under one mortgage… is there anything out there in the market for this ?
Charles Haresnape:
Currently lenders offering buy-to-let priced deals tend to look at properties on an individual basis. Some lenders will however consider multiple flats for example on one title as a single loan.
A draw down type facility is a good example of an innovative approach that some lenders could consider as the market develops further.
Mortgage Solutions:
You may have spotted an article on Mortgage Solutions earlier this week about rental properties outside of London, our next question asks: “BTL has shown a lot of growth in the past few years but as house prices continue fall outside of London will this not force people back into home ownership rather than rental?”
Charles Haresnape:
Reducing house prices is only one part of the equation. A key concern remains lack of confidence from potential house buyers. With continuing economic and job worries demand for house ownership will remain subdued for several years and continue the growing demand for BTL.
Mortgage Solutions:
Next question: “I have been considering making my first move into buy-to-let and have been looking at buying a house at an auction. Will this make obtaining finance more difficult? Do you see more problems with auction bought BTL properties?”
Charles Haresnape:
I would advise any potential first time landlord to thoroughly research the location and tenant demand before bidding. If finance if required speed is key and therefore bridging finance could be an option.
Also consider the state of the property you are bidding on as the vast majority of lenders will insist that the property is in a lettable state for the day of completion.
Charles Haresnape:
Question to you guys from me: Do you see much demand from clients who cannot sell their own house and still wish to move – is let-to-buy and option you have tried?
Question from Damo:
As BTLs are supposedly self-funding do you see the need for minimum incomes being dropped or are they there purely to control volumes?
Charles Haresnape:
Most lenders require income in some form which some preferring as you say a minimum level. The key reason for this is not to control volume but to ensure, particularly for first-time landlords, that any potential void periods can be financed from non rental income. The primary repayment assessment is still based on rental income.
Question from Yorkshire Broker:
On the back of the question about falling house prices in some areas, would you recommend spreading your portfolio around different parts of the country to lower the risk? Or keep them all in one smaller area?
Charles Haresnape:
Whilst in general spreading risk is sensible, the most important consideration is knowing the areas well that you are investing in. There is little point in investing in areas of therectorically higher yields when the properties or the economic climate of the area maybe problematical.
Mortgage Solutions:
Our next question comes via email: “I have a couple of properties located in a student-heavy area, what are the pros and cons of me converting these from family houses to 3 and 4 bed student accommodation. Will it make it more difficult to finance?”
Charles Haresnape:
Potential landlords in this situation need to be reasonably experienced to understand this sector. There are a number of regulations to consider and they can change by local authority area.
It is correct that it is mainly specialised lenders who finance this sector, but that said the right deal can be a great investment and finance can be obtained by talking to the right lender.
Question from James:
I see you have joined the let-to-buy market. Other lenders have criteria to control the borrower remaining in the security. What is Aldermore’s approach to this?
Charles Haresnape:
Our new proposition allows us to consider a potential borrower turning their current residential property into a BTL with ourselves providing they are purchasing a new residential property at the same time.
To give us comfort that this is taking place we do insist upon sight of a copy of the new residential mortgage offer prior to completion of the BTL transaction.
Mortgage Solutions:
Let’s take a second to go back to Charles’ earlier point about let-to-buy, we’ve had this comment from one of our users.
Question from Mike:
Charles, I think the problem with let to buy is that people traditionally go to estate agents when trying to sell a house, how can we publicise that brokers offer solutions to that problem?
Charles Haresnape:
You are quite right that advisers working in Estate Agency can often talk to the customer first. That said, a lot of clients already have a relationship with a broker who in many cases maybe able to help them with the more specialist enquiries.
I think both lenders and advisers should continue to promote the full range of products to all existing and potentially new customers. Aldermore has already worked with a number of broker firms to help publicise more speicalist products and we are always happy to help wherever we can.
A significant number of deals are done by advisers who are not Estate Agency based.
Question from Nick:
Following TMW’s recent u-turn on tenants in receipt of housing benefits, have Aldermore considered relaxing their criteria in this regard? It seems this important market is underrepresented.
Charles Haresnape:
You are right this is a very difficult area, made all the more difficult by government policy changes to pay benefits direct to the claimant and not to the landlords – especially with the new universal credit. Currently therefore not on our agenda to make any changes.
Question from HDC:
Aldermore were meant to be lending in Scotland in Q3 2012 and at the Mortgage Expo you personally stated lending in Scotland would be commencing in March 2013 once a few problems ironed out. This appears to have been delayed again. Why is this, what is the fear of lending in Scotland and when will lending in Scotland finally commence?
Charles Haresnape:
Sadly it has taken us longer than we had hoped as we decided to focus initially to extend our range of criteria before launching the full proposition into Scotland.
You will therefore have seen over the last few months we have launched NewBuy, let-to-buy and significantly enhanced our general criteria. We have started this significant system development and currently anticipate launching over the summer.
We will keep you posted but I would like to confirm that Scotland remains an important part of our development this year.
Mortgage Solutions:
Time for one last question for this session, this comes via email and asks: “A couple of my buy-to-let clients have a growing portfolio of properties, why are there such differing restrictions over how many properties a lender will take from one client?”
Charles Haresnape:
Simple answer is that lenders have varying appetites for BTL and the 2 biggest lenders can therefore be more selective.
It does seem a bid odd to me because a professional landlord with more properties via a single lender will be spreading the risk and potentially surplus rental income could help offset voids on individual properties.
Some lenders, including Aldermore do allow up to 5 properties to be financed on standard BTL products and have a more relaxed view about the total number of properties in the background. We very much have a open for business approach to professional landlords
Mortgage Solutions:
That brings us to the end of this webchat. I want to thank Charles Haresnape for joining us this afternoon and answering the questions put to him. Thanks also to all of our users for reading and submitting questions.
