The UK’s main HMO mortgage lender has indicated business as usual - but underlined corporate loans are not on their property investment agenda.
Paul Howard, head of the Nationwide’s specialist lending, which includes buy to let brand The Mortgage Works (TMW) was speaking as part of a video debate about the future of buy to let.
He was asked about product innovation by brokers and an independent financial adviser and confirmed HMO (house in multiple occupation) lending was still part of TMW’s plans as one of a handful of lenders in the niche market.
His comments came during the debate hosted by trade magazine Mortgage Strategy, aimed at mortgage brokers.
In general, Howard discussed the buy to let mortgage market and confirmed he expected to see increased lending by TMW and other banks and building societies.
He told the panel that buy to let lending is likely to increase by 40 per cent this year - from £10 billion in 2010 to around £14 billion.
Howard cited bigger margins on lending the same amount of money to landlords rather than other homeowners as the reason for the increase - plus continuing demand from tenants to rent homes.
“Buy to let margins are a lot more attractive than residential lending,” he said. “The likelihood lender’s criteria will soften to tighten margins to give landlords better pricing.”
The panel also asked why buy to let lenders charge high fees for arranging mortgages.
“Buy to let fees are misunderstood,” he said. “Higher fees give borrowers lower interest rates and improves cash flow for a landlord. High fees also make the rent cover calculation work better.”
“Costs of a high fee but low rate mortgage are about the same as a no fee but high rate loan - but 90 per cent of customers opt for the higher fee product because the lower mortgage rate gives them better cash flow.
“Low rate, low fee mortgages are not going to happened. The lender won’t make a profit from these loans and buy to let mortgage rates are higher because lenders are not paying the Bank of England base rate for their money.”
Click here for the full 17 minute debate (LINK:http://mediazone.brighttalk.com/comm/INCConjecture/606c42c76c-26798-5178-29311 )
