Mortgages for Business, the specialist Buy to Let mortgage broker reports that the newly introduced CML laws surrounding new build valuation only reinforce measures lenders have already put in place. There are currently only a small group of Buy to Let lenders who will lend on new build properties and they have put stringent measures in place to ensure the mortgage reflects the true property valuation.
“There is currently an oversupply of new build apartments particularly in city centres leading to concerns over property valuation and achievable rents, this has meant already cautious lenders have refused to lend to this property type.”, comments Jonathan Moore, Head of Marketing at Mortgages for Business.
The CML measures are designed to restore lender and investor confidence in an area of the Buy to Let market which has been the hardest hit on property valuation and availability of finance, and seen a significant downturn in investors interest.
“It seems unlikely many Buy to Let lenders will offer new build mortgages in short term until there’s an upward trend sector activity.”
The Buy to Let mortgage industry has demonstrated concerns around new build valuations for some years, with the Mortgage Works withdrawing from the sector altogether in 2006. This was further reinforced by Mortgage Express (the UK’s largest Buy to Let lender) in early February stating future remortgage offers on new builds will be based on the lower of purchase price less discount or valuation.
“Investors should be wary of discounts and guaranteed rents because a property should be attractive without the need for additional incentives. Successful portfolio landlords who are still active in the market tend to buy existing properties in areas they know well and have extensively researched. Properties in up and coming areas or where there is an underlying reason for capital and rental uplift provide the basis of a solid investment strategy. It is essential not to judge the Buy to Let sector by performance of new build property” concludes Moore.