According to the Council of Mortgage Lenders, the Buy-to-Let market has recorded a five year high following a buoyant quarter from April to June, whereby lenders advanced 40,000 buy-to-let loans worth in excess of £5bn. Year-on-year, the number of landlord mortgages has increased by 19%, while the value of such loans increased by a significant 31% - with loans in the same quarter of 2012 worth £3.9bn.
These statistics paint a clear picture of how buy-to-let lending has become an area of remarkable growth for the mortgage industry, while residential loans struggle to match the steep upwards trajectory. In addition, with the Bank of England confirming that interest rates will stay low for a further three years, we anticipate that the popularity of buy-to-let will continue to grow as investors look for more attractive returns via rental property, in place of cash savings.
Taking all this in to consideration, we do need to remain mindful that where there is a boom, it also carries an increased level of risk, as unscrupulous individuals may look to capitalise on the availability of such products.
In particular, with the FCA imposing universal income verification checks on all owner-occupied mortgages, and the demise of self-certified loans, lenders must remain extra vigilant towards misuse of buy-to-let mortgage products. The reason for this is that as individuals look to circumvent any authorisations imposed on owner-occupied loans, they may look elsewhere to instead fraudulently gain access to mortgage products for which they may otherwise not qualify.
This issue, known as ‘let-to-live' is becoming a growing concern. With the increasing availability and take-up of buy-to-let mortgages, lenders must take steps to ensure they have measures in place to analyse cases that match a predefined risk profile and halt any attempts at accessing funds without proper affordability checks.
We are already working with a number of lenders who have integrated let-to-live alerts into their Q-Guard risk dashboard. By creating the ability to electronically assess any application that meets a set risk profile, lenders can automatically identify any transaction that is outside of its lending policy and act accordingly."
Richard Groom, Product Development Director, Landmark Information Group