Bond 2 Let, Opus Mortgages' buy-to-let protection product for landlords and investors, is set to be formally relaunched this week in London at Mortgage Expo.
A rental protection product designed by Opus Mortgages and backed by major lending companies, Bond 2 Let means that when an investor takes out a buy-to-let mortgage they can now also take out a bond, which offers them total protection on their investment.
The bond delivers up to six months' mortgage payments in the event of a property remaining unoccupied for a protracted period, or if a tenant defaults or is late making a payment.
It also covers an investor in the event of an increase in Bank of England base rates, enabling Bond-holders to draw on funds to compensate for higher mortgage repayments.
The scheme works by lodging a bond at the outset of the mortgage, taking six months' mortgage payments upfront and placing the funds in an interest-bearing account. These are available to a bond-holder at any stage.
Investors also have the ability to top up their bond, should they ever need to. All funds left within the bond when the buy-to-let mortgage matures, or is redeemed, are repaid in full to the investor. This includes all interest.
Lockhart Bruce, finance and marketing director of Opus, says: “We're confident that Bond 2 Let meets a real need in the buy-to-let sector.
“There is a lot of risk associated with the buy-to-let market these days. The supply of properties outstrips demand from tenants - and it's a fact that Landlords experience periods when their properties are vacant. In London and the South-East in particular, this can cost them a lot of money if they are not protected.”
Research conducted by Opus reveals that in 2003, voids or periods when properties are not tenanted could cost buy-to-let investors £1.125bn in lost income. The UK's 375,000 buy-to-let landlords and investors face significant financial exposure should their buy-to-let property portfolios be unoccupied for lengthy periods.
The company says it expects the scheme, which wrote £140mn of business during 2002, to be of major interest to brokers attending Expo who have B2L clients.
Figures released recently by the Association of Residential Letting Agents reveal that 58% of its members recorded annual voids of more than five weeks in prime London locations. The average house records a rental void of £3,246 annually, while the average flat suffers an average void of £1,764.