With the buy-to-let market showing renewed strength throughout the year, and accounting for a growing amount of lending volume, Paradigm has said they would like to see the responsible lending practices of the past few years maintained.
A number of new and former buy-to-let lenders have entered the market in 2011 and Paradigm is concerned that greater competition might result in a return to the past with significant rises in maximum loan to values and a distinct softening of criteria, particularly around rental cover and borrower income requirements
Paradigm would like to see lenders maintain deposit level requirements of 15-20% for buy-to-let mortgages and rental cover to remain at the 120% plus level.
It is also urging brokers to make sure their clients, particularly first-time/amateur landlords, are made fully aware of their responsibilities in terms of both the buy-to-let mortgage, the property investment, and their duty of care to their tenants.
Bob Hunt, chief executive of Paradigm Mortgage Services, said: “There’s no doubting that the private rental sector is going to continue to play an increasingly important part in the UK housing landscape. Certainly so given what is happening with low levels of housing being built and, in particular, the difficulties many people face in getting on the housing ladder.
“Indeed, we are already witnessing the effects of such strong drivers this year with a much more significant level of buy-to-let activity, landlords increasingly positive about future portfolio growth and new and existing lenders offering more products.”
Hunt said that the buy-to-let sector was clearly one of the few positives for the mortgage market this year and that Paradigm were pleased to see increasing levels of buy-to-let business from their adviser members.
“However, it is vitally important that we maintain a responsible approach to buy-to-let lending given that it will suit no-one to return to a time when some lenders offered 100% mortgages and rental cover requirements became almost an irrelevancy,” said Hunt.
“Buy-to-let has to work for all concerned and it is important that deposit levels are maintained at their current amount and that lenders do not climb too far up the risk curve, too quickly, in an attempt to secure volume in an increasingly competitive market.
“We should not forget the mistakes of the past and it is important that brokers point out the potential pitfalls to clients alongside the benefits.
“The sector has worked hard, particularly on its arrears levels, and all stakeholders have a duty to dispel the myth that buy-to-let is now a booming market in which any fool can make money quickly.”
