Financial News & Information.

At this present time to say that the mortgage market is in a certain state of turmoil would be the understatement of the year. The situation has gone from one where whoever wanted a mortgage could get one to a situation where it is only the people who can afford not to need one will be considered.

As a result of this tightening of the credit markets, lenders have decided what type of business they want and more importantly what type of business they don’t want. As a result, self certification is all but a Dodo and extinct, a high loan to value mortgage is considered 80%. On that note if you say 100% mortgage to anyone in the industry they will say wow I remember those didn’t they come with flared trousers and some very dubious music ha-ha. But seriously the main business area that has suffered and suffered in a big way is Buy to Lets.

A considerable amount of the growth in the housing market over the last few years can be put down to buy to let. Indeed it is what has kept it buoyant. But this in turn has had a huge effect on the economy in general and the individual in particular. The crux of the problem has been that ordinary people have been having a go at the buy to let phenomenon.

Back in the 1980s, car auctions were primarily the domain of people from the motor trade, and to see an everyday member of the public there was a rare sight indeed. However, there began a trend for people going to these auctions in an attempt to buy a fixer upper, do a bit of work on it and sell it on for a bit of a profit. Suddenly every Tom, Dick and Harry was a car expert and the auctions were full of these people, all trying to turn a fast buck.

What really happened is that a lot of ill informed people ended up paying too much money for a heap of junk which they could do absolutely nothing with, and they ultimately lost their money which they thought they had so wisely spent. The reason for this analogy is that the same situation has arisen in the housing market. People with no real knowledge have been playing entrepreneur in the housing market, with a lot more money than it takes to buy a second hand car. Many people have paid far too much for properties, some without even seeing the house in question.

I have been buying property for over ten years professionally and I don’t mean I bought my own home. I have bought quite a few buy to lets. Even with all this experience I would never buy any property without seeing it and I do not know any other professional landlord who would. So why oh why do ordinary people think they can step into this market and treat it with what can only be described as reckless neglect.

The problem with all this is like when we were kids at school, they have ruined it for the rest of us. All these irresponsible borrowers, and yes I think it is the borrowers fault not the lenders, have exposed the lenders to risks beyond what they can handle and now they don’t want to lend to any of us. Loan to values on buy to lets have reduced over the last three months from 85% to 75% and some think that this will reduce further as property prices continue to fall.

All this leaves an industry in great turmoil with very little prospect of recovery. What I suggest is, I would like to see forward thinking lenders come out with a professional buy to let product for landlords that have over ten properties. These landlords have already demonstrated they can fund purchases up to now and it would mean that they could get into a market that is quite beneficial for buyers in general. In addition this type of lending would have the result of producing some buyers in the market place which would at least keep the housing market moving at a trickle which is more than it is moving at the moment.