B2L could thrive despite market turmoil

At the beginning of 2008 it was widely predicted that turbulent times lay ahead for the mortgage industry and Q1 has certainly seen the market undergo significant changes.

Although it was expected to perform well this year, the buy-to-let sector hasn’t escaped the liquidity crisis and has had to adapt.

Major buy-to-let lenders fled the marketplace as securitisation froze and access to new institutional funding was cut off.

This has led to the dominance of balance sheet lenders with access to funds via their retail depositors.

These lenders have experienced a healthy increase in business as a result of the competition’s demise. But overwhelming demand has caused its own problems, leading lenders to cut products with little or no notice and affecting their service standards.

As there is less liquidity in the market, lenders are being more selective about who they lend to and there have been significant criteria changes to stem the flow of business.

As a knock-on effect of the collapse of the sub-prime market, lenders have been anxious to slash their exposure to risk.

As a result, many of them have reduced their ranges and 90% LTV buy-to-let mortgages have practically disappeared. Changes have also been made to maximum loan sizes, total lending aggregates and the minimum age of applicants.

To minimise risk, the new-build sector is also being treated cautiously, with few lenders willing to accept contractors’ gifted deposits. Some lenders have withdrawn their non-status rental calculation deals altogether.

These factors have created a fast-moving marketplace that is subject to constant change, making the work of buy-to-let brokers more demanding than ever.

But there’s good news. Buy-to-let mortgages still provide brokers with good business and the andy young is chief executive of The Business Mortgage Companyfundamentals driving the market remain strong.

After all, rental demand is rising as consumers wait to see what happens to the housing market before buying their own homes.

Rents are likely to rise too and this year could present great opportunities for landlords looking to expand their portfolios.

As the buy-to-let market becomes more dynamic it can be more difficult to find appropriate schemes to suit customers’ circumstances, so brokers may benefit from the help of buy-to-let specialists.

Specialists with in-depth knowledge of lenders’ criteria and the products available could enable brokers to operate more effectively and help buy-to-let buck the wider mortgage market’s downward trend.