I read with interest Nigel Stockton’s article on buy-to-let gaming. While he is correct in saying there is a risk of products being abused in this way, he goes too far in suggesting NatWest and Virgin Money should withdraw buy-to-let lending to first-time buyers.
There are many clients for whom buying a main residence is a low priority but who are in a position to invest and see property as an ideal investment.
An example is a client of mine for whom I arranged a mortgage earlier this year. He lived with his partner, who owned her home. He had inherited some money and wanted to buy an investment property.
I advised him his options were limited but that based on his income and circumstances NatWest would lend to him as a first-time buyer. We applied and the case has duly completed.
NatWest’s approach is sensible in that it will underwrite first-time buyers purchasing investment properties as if they were buying a main residence. In other words, unless they can afford to buy a property to live in, they cannot afford to buy it to rent out. NatWest’s view is why would someone who could buy a property as a main residence choose to take a more expensive interest rate with larger fees on a buy-to-let basis unless their intention was to rent the property out? This makes sense.
Ironically, another adviser suggested my client would get a better rate if he bought the property as a main residence, not as a buy-to-let – advice my client clearly did not want to take.
There will always be people trying to bend the rules but as long as these cases are vigilantly checked by both lender and adviser and the reason for purchasing is plausible, the risk remains low.
BoE’s mad LTI caps contradict MMR
Last week, Mortgage Strategy reported on the FCA’s guidance on how lenders should comply with the loan-to-income limits announced by the Bank of England in June.
The LTI caps are utter madness and totally contradict the MMR. We will have so many caveats to affordability that we won’t know where the hell we are. And why should some borrowers qualify for higher LTIs than others?
Some people may think professionals would benefit from access to higher LTIs but I have yet to observe any professional group being better borrowers than another.
Some of the worst arrears cases I have seen were for barristers, accountants and solicitors.
Grey Haired Underwriter
Aldermore’s cap is still way too high
I was interested to read the news about Aldermore Bank becoming the latest lender to introduce a loan-to-income cap, at 4.5 times.
This is still way too much.
A sensible LTI is a maximum of three times plus one times for spouse or partner. That is probably affordable and would make intrusive interviews less necessary.
PTFS has lost the personal touch
I was disappointed to learn about Personal Touch Financial Services posting a 21 per cent increase in profit, particularly after it reduced its membership and increased fees for remaining members.
The harsh truth is we have waited out the tough years so that we would be in a good position once the mortgage market improved. Unfortunately, as soon as things did improve, PTFS hit us with huge monthly costs, which means we now do not have the money to invest in the business to grow.
PTFS previously promised us it would not introduce huge fees. But it is shooting itself in the foot because its fees are stopping businesses such as mine from growing, yet if my business grew this would, in turn, increase PTFS’s profits.
Unfortunately, after 10 years we are now seeking to leave PTFS. It has turned into a business interested only in compliance, which does not listen to and is not interested in its members.
The compliance and other tasks we have to complete have increased to such a level that it is almost impossible to follow and actually write any business.
PTFS has definitely lost the personal touch.