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Developers face buy-to-let crisis as values continue to tumble

Commercial lender Business Lending says that with property values continuing to tumble, it has had to turn away an increasing number of developers looking to refinance their buy-to-let portfolios.

Stuart Parfitt, managing direc-tor of Business Lending, says developers coming to the end of their loans are finding that their buy-to-let properties are falling short of what they were originally valued at.

He says: “We recently had one developer who came to us with a group of flats he valued at £1.5m. We had to turn him down as when we got the flats valued ourselves, they were worth under £1m.”

Parfitt says a large number of developers and landlords tried to cash in on the boom times and bought developments thinking they would sell.

He says he would not be sur-prised to see an increase in the number of buy-to-let properties that fall into repossession.

Despite this, the lender is con-fident the commercial market has bottomed out and 2009 will see a rise in commercial activity.

Parfitt says the market troubles will put an end to amateur commer-cial brokers.

He says: “Amateurish commercial brokers have almost vanished from the market. We were starting to see a lot of mortgage brokers trying their hand at commercial broking. But with commercial len-ders pulling out of the market it has led to a decline in such brokers.”

Figures from the Council of Mortgage Lenders released on Fri-day revealed that new lending for buy-to-let continued to decline in Q4 2008. There were 37,000 new loans worth £3.9bn – 12% down on Q3 2008 and 56% down compared with Q4 2007, the lowest quarterly lending figure since 2003.

In terms of repossessions, 0.11% of buy-to-let mortgages were taken into possession in Q4 2008.

But the CML says that at the moment the number of buy-to-let mortgages in arrears, in possession or with a receiver of rent in place is not large.

And in most cases, tenants of buy-to-let landlords who fall into arrears are being given sufficient notice to find alternative accommo-dation even if the lender decides to repossess the property.

Keshav Thukaram, managing director of Smartlandlord.co.uk, says it is no surprise the number of borrowers taking out buy-to-let loans has shrunk as there are no lenders left in the market to provide them.

He says: “Providers of buy-to-let loans are either nationalised and throwing landlords off their books, or sitting on their loan books waiting for the securitisation markets to open.

“Landlords, like the next generation of aspiring home owners, can’t get mortgages.” FSA bans fraudulentmortgage broker (16/02)

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