Editor’s note: Battle of criteria begins


As expected, the past few months have seen buy-to-let volumes spike as landlords looked to avoid getting hit by increased stamp duty rates.

Council of Mortgage Lenders figures show buy-to-let lending in February was up 61 per cent year-on-year at £3.7bn. The figure has been no lower than £3.4bn each month since June last year, having hit a peak of just £2.7bn in the previous 12 months.

Anecdotal evidence suggests volumes have died off since February to the tune of about 10 to 20 per cent, which is perhaps unsurprising.

In an attempt to revive a damaged market, lenders have slashed their rates in recent weeks. The past week alone has seen Accord and TSB cut their buy-to-let rates by up to 30 and 35 basis points respectively.

Moreover, Barclays loosened its criteria to accept applications from joint borrowers and sole proprietors, while Kensington raised its maximum loan cap for buy-to-let and first-time buyers by £500,000.

But soon landlords are very likely to regard buy-to-let as a less attractive investment. From next April, the Government will gradually reduce tax relief on mortgage interest and the Prudential Regulation Authority is set to clamp down on lending, having published a consultation recently on underwriting standards.

This means sharpening rates may well prove futile.

However, lenders need to lend, so they could set their sights instead on the residential market, potentially cutting rates in the sector or loosening criteria.

There are many areas that lenders ought to target. Interest-only, lending into retirement, offset, the self-employed and foreign currency lending – these are all sub-sectors that are underserved at the moment and some added competition and appetite would be a very welcome development, particularly for brokers.

As London Money’s Martin Stewart put it: “The BDMs who are coming in and telling us about their unique selling points are the ones who are picking up all our best business at the moment.”