Buy-to-let landlords earning as little as £2,000 could get a mortgage as lenders scramble to take advantage of lax rules
11-23-2015
- Landlords can expand their property empires even if they earn very little
- Fears first-time buyers are being pushed out by the buy-to-let boom
- Loan approvals rose by more than a third in a year to 24,100 in September
By Rosie Taylor
Mortgages are being handed out to landlords with annual incomes as low as £2,000 as lenders scramble for business in the buy-to-let market, brokers claim.
Flexible rules mean landlords are able to massively expand their property empires even if they earn very little money.
It is now so easy to get a buy-to-let mortgage that borrowers earning just £2,000 or £3,000 a year could purchase a £1million home. One broker said yesterday: ‘There are lenders who say you just have to have any income, as long as you own another property that’s fine.’
He added: ‘Your income could just be £3,000 a year in rent but they would lend you £500,000 on a buy-to-let mortgage. If you can pay the deposit, you could buy a £1million property on that income.’
Priced out: Buy-to-let loans are not subject to the same rules as ordinary mortgages and so landlords are given more help than first time buyers
Loan approvals rose by more than a third in a year to 24,100 in September and the amount handed out jumped from £2.5billion to £3.7billion, according to the Council of Mortgage Lenders (CML).
Buy-to-let loans are not subject to the same rules as ordinary mortgages, but the Financial Conduct Authority (FCA) has indicated that regulators may need to step in to control the rapidly growing market.
Lynda Blackwell, the FCA’s head of mortgages, has suggested intense competition in the buy-to-let market has triggered a cut in underwriting standards – the criteria which borrowers must meet before being granted a mortgage.
HOW LIVING IN A NATIONAL PARK CAN COST THE EARTH
Homebuyers have to pay a premium of more than £100,000 to live in a National Park, a report has found.
Houses in the areas of protected countryside cost 44 per cent more than those in the same county, according to Lloyds Bank.
In the New Forest homes come with a £258,000 premium. In the Peak District they cost £149,800 more than the county average, and those in the Lake District cost £119,600 extra.
The most expensive homes were in the New Forest, where the average property cost £531,000, and the South Downs, where homes were £453,700 on average.
A Lloyds spokesman said: ‘It can be tough for people working in National Parks to buy their own home.’
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And last night the FCA confirmed that it had seen a ‘slight relaxation’ in standards on buy-to-let mortgages – which are unregulated, unlike residential mortgages.
According to David Hollingworth, of London & Country Mortgages, a first-time buyer earning £25,000 could only take out a loan of up to £112,500, meaning they would need to raise a huge deposit of £87,500 to buy a £200,000 house.
Handed out: Mortgages are being given to landlords with annual incomes as low as £2,000 as lenders scramble for business in the buy-to-let market
But a buy-to-let landlord on the same income could pay a £50,000 deposit and be granted a bigger loan of £150,000 to buy the same property. They could then let it out for a minimum of £782 a month.
Broker Wesley Davidson, of Fox Davidson, said first-time buyers were being pushed out by the buy-to-let boom.
And Shelter chief executive Campbell Robb said: ‘There is a serious problem when millions of people are priced out of a home, while buy-to-let-investors have easy access to mortgages to build up their property portfolios.’
Buy-to-let mortgages taken out by ‘accidental’ landlords – for example people who have inherited a home or been relocated for work – will be regulated from March next year.
And last night a Treasury spokesman said the Government would launch a consultation ‘before the end of the year’ to decide whether the Bank of England’s Financial Policy Committee (FPC) should regulate buy-to-let mortgages.