Buy to let sector may be effected by proposed mortgage caps

Landlord Expert
By Landlord Expert June 30, 2010 10:24

 According to one possible scenario currently under examination, this amount would not exceed 75%, which means that buyers would be required to deposit at least 25% of the residential property’s total. The goal behind restricting the loan-to-value ratio in the case of private mortgages is to ensure that some of the main factors that led to the financial crisis in late 2008 are no longer present to wreck havoc in the future. The Bank of England also hopes that such a measure would ensure stability in the lending sector.

If officials do proceed with a cap on maximum loan amounts, residential landlords may be indirectly impacted. Some observers believe that demand for residential rental properties may increase, as a larger number of Britons find themselves unable to purchase their first home. Others, however, argue that fewer potential buyers for homes may negatively impact property prices throughout the UK.

Another potential argument against enacting a cap on mortgage lending is the fact that most banks are much more cautious and weary of reckless loans than before. This has resulted in a marked decline in loan-to-value ratios. In fact, recent statistics confirm that most loans require larger deposits than ever before, even without the Bank of England’s proposed regulation. During the first three months of the year, 98% of all approved mortgages required deposits of at least 10% or more.

Landlord Expert
By Landlord Expert June 30, 2010 10:24

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