A recent Bank of England report suggests that lenders have lent excessively to buy to let applicants, and to secure the country’s financial wellbeing restrictions may need to be implemented to address the issue.
The report revealed that lending in the buy to let field had increased by around 8% in the year running to March 2015 and now represents one in seven mortgages. When looking at the volume of new lending, buy to let mortgages account for just under 20%.
The competition between lenders has no doubt supported the expansion, but the Bank of England feels that they are now displaying signs of a growing attitude to risk when it comes to their underwriting standard. This attitude, they claim, can be seen through an increase in available products at 75% Loan-to-value and above since the middle of 2013.
It is thought that the pressure will continue to grow following the recent ‘pension freedom’ changes, with the Bank of England issuing the following warning:
“Buy to let borrowers are potentially more vulnerable to rising interest rates because loans are more likely to be interest only and extended on floating-rate terms, and affordability tends to be tested at lower stressed interest rates than owner-occupied lending.”
They concluded by suggesting that later in the year, the Treasury will consult on how the Financial Policy Committee could restrict buy to let lending.
Having passed your CeMAP training and associated exams you will be able to meet with customers and advise on the most suitable mortgage package, in line with current regulation as well as your employer’s processes and procedures.