The largest buy to let lender has stopped lending to property companies, leaving a massive hole in the market and borrowers struggling to find alternative sources of finances.The Mortgage Works – the specialist buy to let lending arm of the Nationwide Building Society – no longer accepts applications from companies.
Paragon Mortgages, another specialist buy to let lender for professional landlords, is still willing to finance buy to lets, houses in multiple occupation (HMOs) and blocks of flats for companies.
But landlord directors with property companies holding their portfolios now have limited borrowing options.
Commercial banks and niche lenders are still accepting applications for buy to let financing, but often the minimum loan is at least £1 million – and completing a deal is rare as banks strive to divorce themselves from risks associated with the transaction.
Many of these lenders are already over-exposed in the student letting market after financing billions of pounds of private hall developments.
As the risk is perceived as high and the number of lenders in the market is low, many are taking advantage by cherry-picking deals with low loan-to-values of 60% or less, while charging high interest rates and arrangement fees.
The alternative is buying rental property as an individual rather than a company.
Plenty of lenders are offering competitive buy to let mortgage deals, but most of the cash is going to remortgages rather than purchases.
Corporate buy to let borrowers should sit tight on their mortgages, because The Mortgage Works may have stopped advancing cash, but will continue to service existing loans.
For investors looking to buy, complete the deal by borrowing as an individual – but look out for lender’s thresholds or property numbers and values.
For instance, some lenders will only advance buy to let funds to landlords with up to three properties valued at no more than £2 million.