Heron critcised the sector and said he believed lenders would encourage people who weren’t suitable for a BTL property to move into the market.
Speaking at the Mortgage Intelligence conference, he said: “Non-conforming BTL is a step too far, in my opinion. A year ago, there was no demand for this product but there is now a danger of drawing in the wrong people by offering non-conforming products.”
Heron highlighted the fact that the BTL market has a lower arrears rate than the mortgage sector as a whole, with three-month arrears at 0.73 per cent on BTL, and just under 1 per cent for the combined industry.
Mark Sismey-Durrant, chief executive of Heritable Bank, agreed non-conforming BTL had its problems.
“Ultimately, BTL is an investment and a non-conforming mortgage doesn’t make a good investment because the cost of servicing the debt, through higher rates, is greater, which in turn makes the rental calculation harder to work out.
“Non-conforming in its true context means someone with credit difficulties, but lenders have been willing to lend to them because of the rising values of property. This isn’t going to work and could store up problems for the future.”
However, Arron Bardoe, sales director at Flexible-mortgage
.net, believed brokers needed to have the option.
“It would depend on the reason the adverse existed as it may be small CCJs or a couple of small arrears on one of their four portfolios. Many lenders would overlook this anyway but it would be unfair to exclude a person just because of a glitch in their finances. It’s important the products exist as they give brokers the choice to make the right decision for the client.”
