In the biggest shift in 25 years, BTL lenders will have to cut LTVs to comply with the regulatory changes to underwriting
It is hardly the most complicated of formulae but, in the mortgage market, a base rate cut equals an opportunity for both brokers and clients.
Pricing in the buy-to-let sector was already competitive but the Monetary Policy Committee’s announcement has been a catalyst for a number of lenders to move their own rates.
The big question now is: how much lower can buy-to-let rates go? I suspect they will not fall much further and therefore the opportunity that currently exists should be seized.
I recently suggested clients should get out and fix while they could and I see no reason to alter this view, especially when you consider how the regulatory changes to buy-to-let underwriting are likely to play out.
In the scheme of things, we must ask what those changes may achieve. Given the standard of underwriting, and that losses on buy-to-let are comparatively low, what is the real reason for these changes? Could it be that, having seen the projected increase in buy-to-let lending anticipated by lenders – which would mean more properties transferring from the owner-occupier to the private rental sector – the decision was made to act in order to pare back activity levels?
Whatever the intended aim, lenders will have to act and, in what will be the biggest shift in 25 years, they will be cutting their LTVs. For advisers and buy-to-let clients this is big news: this restriction of lending supply rarely happens. All roads currently point to buy-to-let action, so tell your clients to act now.
Bob Young is chief executive officer of Fleet Mortgages