A risk expert at a leading buy to let mortgage company says the industry should actually embrace the restrictions on lending which are expected to be announced this year.
Aidan Brock, risk manager at Foundation Home Loans, writes in Mortgage Strategy that the lettings industry should not criticise but instead consider how it can demonstrate greater collective responsibility and work in closer co-operation with the regulator.
“As year-end approaches, and with the rush to complete deals before the stamp duty increase in April, it will be tempting for lenders to start competing more aggressively on criteria as well as price. But we should be wary of forgetting the lessons of the past and of supporting short-term leverage customers who may find unsustainable as interest rates and the costs of being a landlord rise” he writes.
He says his firm’s data indicates that lending above 75 per cent loan-to-value leads to a significant increase in default rate, so it is right to take action to prevent over-enthusiastic lenders reverting to “old lending practices of LTVs in the mid-80s and above."
“Added pressure from further unexpected external factors could easily turn profit into loss for landlords if we do not remain prudent. Even if we believe the market will never return to the levels of stress seen in 2007-09, the Prudential Regulation Authority will be measuring us against that benchmark and we would do well to take heed” he writes.