B&B demise 'does not mean end of buy-to-let'

Tuesday 30th September 2008

The nationalisation of Bradford & Bingley will make finding buy-to-let finance more difficult, but there are still plenty of lenders out there, according to brokers.

Katie Tucker, technical manager for mortgage broker Mortgage Force, said the demise of B&B will cause problems for some as their products offered a particularly generous level of rental cover.

"But people shouldn't panic, there are still plenty of lenders offering buy to let mortgages," she said.

The market will be hit by the nationalisation of Britain's largest buy-to-let lender as these types of loans will become more expensive, while property values continue to fall.

"I think it will naturally go quite quiet as there will be little consumer hunger for assets that are losing value," Ms Tucker said.

"The huge amount of people who jumped on the buy-to-let bandwagon will be looking to get out."

In the past, buy-to-let lenders required the amount of rent charged every month cover 130 per cent of the mortgage payment. This had dropped to as low as 100 per cent recently, encouraging more people to become landlords and short-term property investors.

However, there is still value in the market over the long-term, Ms Tucker said.

"If there are fewer places for people to rent, rental income will increase, so there will be a market for mortgages again.

"So there will be a slight dip as the last-minute rush of people come out of the buy-to-let mortgage market, then it will regrow as those who are left get the whole share. People will always need to rent."

For those renting from a landlord with a buy-to-let mortgage from B&B, there is no need to panic that you may be on the streets soon.

A spokesperson from the National Landlords Association (NLA) said: "With existing mortgages, it is business as usual. The mortgages have been taken into public ownership, so they aren't going anywhere."

The rental market will hold up despite any difficulties in finance, spokesperson Vincenzo Rampulla said.

"This will differentiate the men from the boys. Those who were hoping to make a quick buck will go quickly but rents seem to be holding up in the UK."

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