Buy-to-let doom and gloom – don’t believe all that you hear, says Mortgages for Business

Buy-to-let investments have been very much in the media spotlight in recent weeks, with The Money Programme (October 2007) and Panorama (February 2008) both painting a rather gloomy picture, highlighting the plight of investors who have lost hundreds of thousands of pounds following falling house prices.

Mortgages for Business, the leading UK specialist buy-to-let mortgage broker, responds to these reports, calling them misleading, deceptive and misrepresentative of an investment vehicle that, when judged across the country and across different property types, is in good health.

Much of the negativity surrounding buy-to-let seems to focus on the new build sector in city centres, and the over supply of properties, particularly flats and apartments, in areas such as Leeds.

Jonathan Moore, head of marketing at Mortgages for Business, said: “It is true that the demand for such properties has fallen and with it their value and the rental incomes. But to judge the entire buy-to-let market on one class of property is wrong, and to suggest that this is indicative of the entire buy-to-let market is just misleading.

“Much of the negative hype tends to neglect better performing categories of property which enjoy higher yields, such as HMOs (houses in multiple occupancy), and also fails to address areas around our cities where house prices are rising due to city centre affordability issues.”

Buy-to-let investors should also think carefully before making their investment warns Moore. “Investors who choose to part with large sums of money investing in property they haven’t seen, in areas they do not know, and through third parties are likely to experience problems. You wouldn’t purchase shares or invest in a business without first doing some background research – it is the same with buy-to-let.”

“Successful investors are those who have a good understanding of a local property market, who get comparable rents and valuations. The best research is almost always your own,” adds Moore. “Combine this with research from Paragon Mortgages published at the beginning of this month showing an increase in rents of 19% in 2007, savvy investors have plenty of reasons to feel upbeat.”

Much attention has also surrounded property valuations on new builds, where builders’ discounts appear not to have been taken into account in the mortgage valuation. “Quite simply, if the valuer is aware of these discounts and ignores them he is breaking the law and mortgage fraud is being committed,” says Moore. “And the penalties for mortgage fraud are severe.”

The buy-to-let mortgage industry has responded to concerns around new build valuations as far back as 2006. This has been further reinforced by Mortgage Express (the UK’s largest buy-to-let lender) who in early February 2008 stated that future remortgage offers on new builds will be based on the lower of either the purchase price less discount or valuation.

Moore adds: “Would it be fair to judge the performance of shares in financial service companies using Northern Rock as a gauge? Why then judge buy-to-let solely on city centre new builds and by transactions where allegedly shady dealings have taken place.”

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

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Notes

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors. Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Contact

Jonathan Moore, Head of Marketing

Mortgages for Business

Tel: 01732 471600 / 07810 717421

Matt Baldwin, Coast Communications

Tel: 01233 503200 / 07930 439739

Will 15 year fixed rate btl mortgage change investors strategies?

Mortgages for Business, the leading UK specialist buy-to-let mortgage broker, is offering a new 15 year fixed rate portable buy-to-let mortgage.

This new mortgage product marks a shift by lenders in recognition that buy-to-let market conditions are changing, with the market now dominated by portfolio investors who, according to Association of Residential Letting Agents (ARLA), have no intention of selling their property for at least 17 years.

Previously the maximum term available for a fixed rate buy-to-let mortgage was 10 years. The 5.99 per cent 15 year product has been launched by specialist lender The Mortgage Works, and is offered through Mortgages for Business.

Jonathan Moore, head of marketing at Mortgages for Business, said: “This mortgage is rather clever as it is portable. This means that it can be moved between properties should an investor decide to sell and buy a new property.”

Mortgages for Business expects that the mortgage product will suit cash-rich or inactive investors who choose not to regularly remortgage properties in their portfolio in order to raise capital to fund further purchases. Remortgaging is the cornerstone of a portfolio building strategy allowing investors to release equity from capital appreciation to invest in further properties

“We applaud the idea behind this new mortgage product and we expect it to be attractive to some investors,” says Moore. “Lenders are responding to changing conditions by developing new and innovative products that appeal to different, and often smaller, market segments. However we would expect that the large majority of investors will continue to favour fixed rates of three years or less.”

Long-term fixed rates have been widely supported by the government in the residential mortgage sector. However they have remained unpopular with borrowers who find it difficult to judge value over such a long period. Long-term fixes can also be constraining because they do not allow for changes in personal circumstance or, in the case of buy-to-let, landlords’ changes in investment ambition.

“From our experience most investors do not wish to fix beyond three year because it is almost impossible to predict what will happen to SWAP (the basis of fixed rates) and money markets much beyond this horizon. However there is certainly a niche market for this groundbreaking product” adds Moore.

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

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Notes

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors. Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Contact

Jonathan Moore, Head of Marketing

Mortgages for Business

Tel: 01732 471600 / 07810 717421

Matt Baldwin, Coast Communications

Tel: 01233 503200 / 07930 439739