The traditional ceiling on buy-to-let portfolio mortgage lending has been £2 million over the whole property portfolio. This figure acts as a safeguard for the mortgage lender so they do not over exposure themselves to risk on one borrower’s portfolio. However, the £2 million figure now appears to be insufficient for market needs and specialist buy-to-let lenders including Mortgage Express and Capital Home Loans have increased this figure to £5 million.
The £2 million figure based on current average house prices of approximately £190,000 and average borrowing at 85 per cent loan to value would equate to approximately 12 buy-to-let properties.
Jonathan Moore, head of marketing at Mortgages for Business, commented: “Professional buy-to-let investors and those who have been investing using buy-to-let mortgages since their inception 10 years could now have reached the £2 million boundary. A number of BTL mortgage lenders target their products at the professional BTL investor who accounts for the majority of transactions in the market. For this reason lenders are reacting to the needs of the professional investor in the market.”
Despite the hype surrounding BTL investment and its new entry investors, the amateur investor is still very much sitting in the market’s passenger seat. According to 2006 Council of Mortgage Lenders' statistics the large portfolio landlord remains dominant - 13 per cent of landlords own 74 per cent of the BTL stock, with 53 per cent of landlords own a mere 3 per cent of the stock.
Moore added: “It is for this reason that some lenders will seek to target the professional BTL investor with their mortgage products. Lenders must have seen an increasing pattern of investors reaching the £2 million in 2006, and in turn made the decision that these limits were restrictive in attracting portfolio business.”
