Landlords and the "Time Beumb!"

As tick follows tock follows tick follows tock many landlords are sleep walking into BTL meltdown. If rumours about the impending changes to BTL funding are to be believed then it will not be long before the landlords fueled on 80% LTV deals come a cropper.

Already we have seen one of the major players in the market The Mortgage Works change their criteria to increase the required rent to mortgage coverage from 125% to 145% and reduce their maximum LTV from 80% to 75%. This does not bode well for the part time investor and comes at a time when it is clear that the government policy in withdrawing tax breaks is clearly a move to flood the market for the eager first time buyer to gobble up.

The main issue is that it is likely that the landscape over BTL funding is likely to change in the coming years. The government are adamant that there requires to be a shakeup over funding which is likely to result in a two tier funding system of commercial BTL and residential BTL based on the number of properties that you hold. For those landlords with only a couple of properties then they will get access to interest only residential funding which is likely to be more competitive than the commercial funding that will be forced on landlords with larger portfolios and will in all likelihood be based on a capital and repayment model.

For many landlords whose title deeds sit in their own name and who come to the end of their present deal, there may be no home for their funding. They are in a Catch 22 of being in a market where the numbers no longer work. Too expensive to flip their properties into a limited company but cannot afford to keep them in their own names. The perfect storm! There may be only one option for them and that is to dispose of their portfolio.

And the government think that the first time buyers are going to benefit? All I can see is that the larger landlords are going to gobble up the smaller portfolios.

Time to cash in your chips before it goes beumb?