This is not a stupid question to ask. I was with a client last week and I was arranging a five year fixed rate buy-to-let mortgage on a 75% loan-to-value mortgage with the Bank of Scotland. While my client and I were signing all the paperwork for their new buy-to-let mortgage, the Bank of Scotland had sent me an email informing me that the rate had been pulled with immediate effect and was no longer available. Ouch! lots of work done for nothing!
What chance do clients and brokers have in a mortgage market that is in turmoil, constantly changing and reducing mortgage products? Incidentally, there are no more five year fixed rates available in the buy-to-let mortgage market at present and the Bank of Scotland are only doing buy-to-let tracker rate mortgages.
The next common problem I have seen recently with my buy-to-let clients is that their property portfolios have devalued and they are in negative equity. This is fine if they could remortgage to a better rate, but for many they cannot and are now stuck on the standard variable interest rate (SVR) – the worst interest rate to be on! Negative equity is generally not an issue for most property owners as long as they have no intention of moving and can sit through the slump in the property market.
“The Day Buy-to-lets had a heart attack!” To add to the buy to let landlords problems, Bradford & Bingley (one of the leading buy to let lenders in the UK marketplace) was taken into state ownership last Friday. “Great!” I hear you say but take a look at Northern Rock which was privatised last year. Northern Rock clients are now being forced to move their mortgages as new mortgage deals are no longer being offered. If they choose to stay with Northern Rock they will end up on the standard variable rate – the worst rate a bank can offer its clients. Northern Rock is emptying their mortgage book as clients come to the end of their mortgage deals and only taking on new mortgage arrangements.
I personally know of clients who are experiencing the above situation, some of which are unable to move their current mortgages due to the down valuation of their properties and the negative equity they now hold. They are subsidising their buy to let mortgages, in some case to the tune of £500 to £2,000, depending on the number of properties and the current mortgage deals they are on.
If all this is not bad enough some landlords with at least 15% equity in their properties are finding lenders that will offer them new remortgage deals but the lenders then want a 2% arrangement fee for a short term mortgage scheme up to three years. This can add a further £2,000 or more on to the new mortgage deal.
However, there is some good news for landlords. Rental Demand is strong, very strong actually!
Three of my clients have raised rents for their properties recently and have found new tenants. In one case the new tenants paid one years rent upfront. What a result! My advice to anyone with any kind of mortgage is that you should speak to a qualified mortgage broker who can provide you with good sound financial advice to suit your personal circumstances. Someone who has access to the ‘whole of the mortgage market’ and can find you the best deal to suit your financial circumstances.
Remember we are in a fast moving finance market and nothing is as it was yesterday – tomorrow should be better. Your thoughts and comments are very welcome. Just click on the comments button below and leave your thoughts and views.