The fundamentals for a strong buy to let market have improved over the duration of this year. Rental yields are increasing, repositions are falling back, tenant demand is strong, the emergency budget gave a nod with its corporation tax cuts, the large buy to let companies of old have commented on lower arrears and increasing profitability and landlord sentiment is broadly positive. Yes there is still nervousness surrounding the spending review and public sector cuts, but with the near extinction of council and social housing, people need to live somewhere.

With this in mind, you would expect to see a reasonable but cautions buy to let lending market, and we have seen some slight improvements this year including at least 3 new lenders, one 80% LTV product (the maximum elsewhere is 75%), slight resurgence of HMO and limited company products and one ‘refurb to let’ product. All of these additions have been widely welcomed by mortgage brokers and landlords alike.

The Buy To Let market as a whole however is lagging behind the improvements in the residential mortgage market and the reason seems to be lack of competition. The victims of the crunch were many: Mortgage Express, TMB, Paragon, Bristol and West , Bank of Ireland and towards the end Northern Rock, all of whom were contributors to the market. The survivors are The Mortgage Works (Nationwide’s specialist lender) and Birmingham Midshires (Lloyds Group) Other bit part players include Natwest, Coventry, C&G and a few mutuals and building societies - none of which have significant appetite or capacity. The Market is dominated by the ‘Big 2’ and this 2 party monopoly is keeping costs high (3% lenders fees are the norm) and maximum loans are broadly capped at £1m. If these two can fill their lending quotas with high fees and capped loan amounts why would they relax their limits?

The rental income requirements are still tough at best (125% at 5% is the best you can hope for which keeps loan to value in the whole less than 65%. The 80% LTV mortgage mentioned earlier only fit’s the highest yielding properties in the most prime areas of London.

So, if you are a landlord with properties valued more than £1.m and you are coming to the end of a low tracker rate onto a standard variable of 5% (at best) or you are keen to expand your portfolio to reap the reward of the rental market (first time buyers and key workers need to live somewhere and, for the time being at least, being able to purchase depends on the capital adequacy and generosity of the ‘Parents Bank’) the high street is not the destination of choice.

Enness Private Clients have access to a number of niche private banks who are able to satisfy high mortgage requests or smaller buy to let purchases which don’t fit the rigid criteria above.

Large Buy to Let Mortgages - Private Banks

We have been able to arrange buy to let mortgages for over £1m by utilising our private bank contents and using a more rounded approach to banking relationships. Many of these lenders still require a rental income of 125% at 5% (or more) which as mentioned blows all but prime London properties out of the water. To satisfy the bank we use one or a number of the following:

Move cash or assets to a private bank in conjunction with the mortgage. This gives the bank something else than the mortgage to make money off and gives some additional liquid security should the property lie un let for a few months, which may directly affect your disposable income and put strain on your finances.

• Lodge 6 months interest with the lender, which sits in locked account and it the vehicle for receiving rent and paying the mortgage. This is a lighter version of the above and is usually used when the rental income is 10-15% out

• Move your day to day banking to the lender - this again gives them something extra and gives them other ways of providing services. Lets face it, doing this would provide a much better service than your high street bank in any case!

• Cross Charge other security. If the subject property falls down on loan to value (down valuation or requires modernisation) we may be able to place a charge over another property, again to provide additional security.

• Prove your income (!!). Practically all of the high street lenders still do not require personal income to qualify for a loan. If the rental income is, say, £1000 short for their calculation and you have, say, a disposable income of £2000 after normal monthly expenses, surely this can be included in the decision making process. We still think it is absurd that this is not normal practice and thankfully we have persuaded some of our lenders to work this way.