Buy To Let Mortgages

NEIL SIMPSON writes a weekly mortgage column for the Mail on Sunday’s Property supplement and is a regular contributor to Financial Mail on Sunday. He is a former Personal Finance Journalist of the Year – and a keen buy-to-let investor.



Buy-to-let investors look set to miss some of the best rates and most flexible deals if they stick too close to the high street this year. Researchers at Moneyfacts have just said that the number of buy-to-let mortgage deals has just topped the 2,000 mark – up by half in less than a year.

But while all this competition should be good news for borrowers a close analysis of the new rates themselves shows that the best of them come from the less well-known specialist lenders. These are the lenders that the most experienced buy-to-let investors use – and first-time and newer investors should start taking a look if they want to squeeze the maximum amount of profit out of their portfolios.

Several things tend to stop property investors from turning to the specialists. First it simply seems easier to pick the same high street lender that looks after your residential mortgage and is busy advertising buy-to-let deals of its own. Secondly there is the problem of tracking down the specialists and analysing their better offers. Finally there are the understandable worries over doing business with a company you know very little about.

Here’s a quick look at why each worry can be put to rest. Yes, it can seem easy to go to your existing high street bank or building society when you want a buy-to-let deal. And to be fair many of them are sprucing up their mortgage deals for property investors. Alliance & Leicester, for example, is changing the rental cover terms on many of its deals and offering near-prime and self-cert buy-to-let mortgages as well. Coventry building society is revamping its range this spring while Leeds building society has scored a first with an offset buy-to-let loan. But independent brokers say most high street offers can still be beaten by the specialists – in terms of flexible lending features if not in lower rates and fees.

Tracking down the better value specialists shouldn’t be as hard as it seems. A good broker will obviously do that for you while a simple internet search will throw up the key players. The likes of BM Solutions, GMAC-RFC, Mortgage Express, Mortgage Trust, Paragon and Platform tend to dominate the list of lenders picked by our most experience buy-to-let investors. So they are worth considering if you plan to join these experts with a successful and growing portfolio of your own.

The final worry comes with signing up to a company you know very little about – and it’s not an issue that can be dismissed lightly. With something as big as a mortgage it is essential to know as much as possible about the company you are dealing with. You want an assurance that it is reputable, fair and has a track record of offering long term good deals rather than fly-by-night specials. Fortunately many of the specialist buy-to-let lenders are actually subsidiaries of better-known banks and building societies – Mortgage Express is part of Bradford & Bingley, BM Solutions part of Birmingham Midshires and Platform part of Britannia, for example. So you get the backing of a household name company, with the better deals and more flexible terms of a specialist subsidiary. No-one expects 2007 to be a particularly easy year for buy-to-let investors – few years ever are, if we are all honest. But getting the right mortgage will always help underpin your investment. So it looks like it will be more important than ever to really shop around for a decent deal, or to get an independent expert to do it for you. The buy-to-let mortgage market is broader and deeper than most people imagine. There are some great rates and truly flexible terms hidden amongst all the also-ran deals. It really is worth looking for them.

Previous Property Investor News from Neil Simpson 13/2/2007

THESE are not good days for property investors to be reading newspapers. Almost every day seems to bring more headlines reporting an imminent crash, with commentators gleefully listing all the latest surveys about failing confidence, falling prices and dreadful prospects.

So should we all take the papers’ advice, sell up and head for the hills?

Of course not. Because there is a lot more to the negative headlines than meets the eye. Reading between the lines – or digging a little deeper beyond the facts that are reported – can produce a completely different interpretation of the market and its prospects. For more than a decade I’ve written about property for tabloid newspapers, quality broadsheets and everything in between. The rules on each of them are the same: as a reporter you do everything you can to make your story grab your news editor’s attention. And when it comes to stories about property this means you have to find figures that look very, very good – or very, very bad.

That’s because there are no grey areas about property stories. ‘House prices set to bump along with inflation’ won’t make any decent editor hold the front page. But: ‘House prices to rise by £1,000 a week’ might. As might: ‘House prices to slump by 30 per cent in a year’.

For the past five years property reporters have had a good run out of the former stories. Now we know we need to push the latter if we’re to get our names in the paper. So it’s little wonder that the most negative parts of property surveys are given star billing - while all the other data and caveats are brushed under the carpet.

As I write this article I’m looking at headlines from many of the weekend papers. A report from Deutsche Bank gets a lot of coverage – and several headlines pick out a claim that house prices could fall by that frightening 30 per cent figure next year. But very few of the reports put that figure in its proper context – that this worst case scenario will be avoided as long as the Bank of England cuts interest rates at some point next year. And everyone - including Deutsche Bank – seems sure that cuts are almost guaranteed. So the national 30 per cent price falls that grab the headlines are just so much hot air.

The same weekend’s story from the National Association of Estate Agents also shows some skilful news management. Many papers led on the key figure that house prices fell by 1.56 per cent over the past month. But most reports bury or ignore the NAEA’s other news that the number of first-time buyers is rising at its fastest level since the summer and that the rental market is strengthening with rents rising and the number of empty properties on estate agents’ books falling.

Of course it is wrong to dismiss negative news stories about property as unimportant. Strong sentiment is vital to a healthy housing market and too much bad news can send confidence, and then prices, heading downwards - even if the reports themselves are exaggerated or wrong.

But buy-to-let investors will have to look beyond the headlines this late winter to keep their sanity.

On a personal level I’m focusing on the fact that we’re still a nation that loves to own property – so even if demand fades for a while it won’t go away forever. And I know that we’re still a nation with too few flats and houses to go around – so all our tenants won’t disappear overnight either.

Finally, I’m planning on staying invested throughout the current media storm about prices. Because I don’t think it’s going to feel as cold as many of my colleagues suggest.