Tom O’Neill, chief operating officer of FUEL, said many buy-to-let lenders are not familiar with clients’ needs and subsequently many products launched into the marketplace do not meet their expectations. He said lenders need to react to the marketplace and give investors what they want.
“Lenders are in danger of calling the sector wrong,” said O’Neill. “Some buy-to-let lenders are bringing out products which are a nonsense for investors. Clients are asking us why products have a 125/130 per cent rental income stipulation – a number of lenders are flexible such as GMAC-RFC or Northern Rock but many are not.”
Colin Dale, head of lending at Skipton Building Society, denied that a rental cover requirement of 125 per cent was putting clients off the buy-to-let sector. “We think we’re pitching it just about right at 125 per cent,” said Dale.
“We need to be prudent and we have an obligation to our members to continue to be so. If you opt for a product with 100 per cent rental income cover the client is not allowing for anything else – for example, the income needed to cover the management fees related to renting out a property.”
O’Neill argues the buy-to-let market has grown so fast, with lenders taking plenty of business volumes, that they’ve rested on their laurels. “Lenders should be responsible to the needs of the buyer,” said O’Neill. “This is a short-sighted approach. It’s cutting off their nose to spite their face.”
Mark Sismey-Durrant, chief executive of Heritable Bank, believes a number of lenders are more open to client’s needs but a large number are still slow to change. “We’ve taken a flexible and risk-based approach – if clients have other income we’ll take account of that,” he said.
“With rental yields what they are at the moment, it’s sometimes hard to meet the rental income requirement. A lot of lenders will stick rigidly to their criteria and to be honest we’re pleased that they do.”
