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FTB buy to let has pitfalls for the adviser, warns Stockton

by: Nigel Stockton
  • 27/01/2015
  • 0
FTB buy to let has pitfalls for the adviser, warns Stockton
I am pleased that RBS and Virgin Money have taken out buy-to-let products for first-time buyers.

However, I know these products are something that can cause us brokers some concern. I get accused of not helping people who have rented their house out in the North of England and use the rental surplus as a contribution to a rented property in the South of England, where they actually reside.

I also get accused of investment bias. The argument being, why can’t consumers buy property earlier in their lives and rent it out while they too are renting, as part of their investment strategy? It is their choice and their option.

There will be one or two people adversely affected by this type of lending. In my opinion, these are the few not the many and we cannot afford to cater for the minority when consumer temptation for an interest-only product is possible, and leads to an inadvertent gaming of the system.

Cases where consumers say they want to become a landlord because they live in the same town/city as the property but then live in the property themselves are not unheard of.

I wouldn’t want the consumer or the mortgage consultant to be placed in any invidious position and I wouldn’t want mortgage consultants to spend time, effort and energy checking if first time buyers who only have a buy-to-let mortgage, haven’t subsequently been added to the electoral roll or taken out a credit agreement from the ‘rented’ property.

Having done extensive reviews of this product I believe that it is extremely difficult to appropriately review the product pre-completion, as most of the checks are made post completion when the person is already in the property. It seems to me that this is one product offering that should be allowed to slowly pass, as for the vast majority no good can possibly come of it.

The only exception I would make is for accidental landlords by inheritance. These products could well be regulated shortly and I am comfortable with this.

Nigel Stockton is financial services director at Countrywide




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