Don't Believe Everything You Hear!

So this week I’d like to convey to you what we’re seeing when we receive emails from lenders and checking Intermediary news. This is quite different from Mainstream Media news that tends to be more high level or broader in its approach.

The first bit of news that came on my radar last week may seem quite contradictory to the TV news we witness.

When journalists are banging on about reductions in house prices and increases in the cost of everything possible, its pleasant to read something which flies in the face of this. 

So one of, if not the biggest Buy To Let (BTL) lender in the country has just increased the percentage it will lend against a property. Typically in BTL world you can lend up to 75% of the valuation of a property. Well, TMW or The Mortgage Works (owned by Nationwide Building Society) have raised their Loan To Value (LTV) to 80%. This has been done previously but in the current climate is shows confidence in where things are heading. Lenders don’t increase LTVs to 80% in the BTL market if we’re about to see big falls. The fact that prices have only fallen by 3% in the last 12 months (according to Nationwide House Price Index) with all that’s gone on is testament to the strength of the housing market. Yes, we still have a massive supply and demand imbalance in the UK, so as long as this is the case and inflation, as well as interest rates either stay around where they are or come down, then prices will not be moving by a great deal. Any landlords receiving this will agree that rental demand and the amount they are now receiving compared to 2 years ago have increased dramatically. This lowers risk for lenders and because they still have a strong appetite to lend, in fact they absolutely need to lend, they are increasing their LTVs to get more business through the door. 

What we are seeing is a movement towards energy efficient products, whereby lenders either give a client a lower rate or higher LTV for a more efficient energy performing home, or they only make certain products available if your EPC rating is C or above for example. 

In the Specialist Lending Sector, which is geared up for Property Developers and Investors, although we have seen some increases in rates over the last 12 months or so, they haven’t increased by nearly as much as the Bank Of England (BOE) rate. 

Development Finance rates, which are designed for building projects coming out of the ground or conversions of existing buildings, started from around 7% over a year ago. They start from around 10% now. So BOE rates have gone up almost 4.5% but their rates have only increased by 3% and in some cases just 2%. This is because lenders are covering that margin and still have a strong appetite to lend. 

Yes, lenders may be applying more caution in their underwriting process and increasing things like contingencies (for development finance) or stress tests for BTL (although these have come down somewhat) but they are not charging more than the cost of finance going up. They are taking more of the hit. 

You might think that with the noise in the press it's meant anything more complex or that carries a higher degree of risk has been shelved. No. One of the specialised lenders we deal with is still open for business and in fact now allows for 75% borrowing on both residential and commercial properties. They are still lending on holiday lets and HMOs (House of Multiple Occupancy), which were a big challenge in the pandemic. In fact, if you can find an HMO with 30 bedrooms, they will lend against it. Their criteria states there is NO LIMIT on the number of bedrooms they will consider. So, if you can find an old hotel or very large residential property and obtain change of use to a large HMO, you can get lending against this. And the yield you will now get with all these rent increases will be quite substantial. 

We often get enquiries from Expats working abroad or Foreign Nationals wanting to hold UK Property. Well, there are lenders who will lend to Foreign Nationals, living overseas without a UK footprint. This means they can make their money go further and leverage against property, instead of having to keep waiting, saving up and paying cash for things. 

We arrange all sorts of Property Finance for people that can range from £25,000, in fact below in some cases, right the way up to the largest one we’re dealing with right now, £100million for a Property Development scheme.

There really is something for everyone.

Any questions you have, no matter how silly you think they are, they are not. We are here to help!

All you need to do is get in touch with the team here!

Steve

Express Mortgages is a trade name of Express Mortgage Services Ltd. Express Mortgage Services Ltd is authorised and regulated by the Financial Conduct Authority. [Reg No: 474427] Company registered in England & Wales no. 05167662

Your home may be repossessed if you do not keep up repayments on your mortgage. Some types of buy to let mortgages are not regulated by the FCA.