Lloyds banking Group Cuts its Buy to Let Lending

The Lloyds Banking Group, one of the largest British mortgage lenders announced that it has imposed new standards on the buy to let properties it will lend against, thus making it harder for buy to let landlords and investors to get a mortgage loan.

Lloyds, which is 43%-owned by UK taxpayers, announced that from now on buy to let investors will not be able to get mortgages for more than 9 properties across all bank’s member brands, which include Halifax, Lloyds TSB, Bank of Scotland, Cheltenham & Gloucester, Birmingham Midshires, the Mortgage Business, Intelligent Finance, and Scottish Widows Bank.
Moreover, buy to let investors will not be allowed to get a loan that totals to more than £3million across all these banks. While existing banks’ borrowers will be honoured, new customers seeking to get new finance will be obliged to turn to other banks.
Given the fact that a large number of investors tried to enter the buy to let market lately as it offers a safe type investment and good returns, the move of the Lloyds Banking Group Plc. will worsen the situation on the buy to let mortgage market, which has already seen shortage of mortgage deals as a result of the economic downturn and a consequent decrease in the number of specialist lenders.
The bank’s representatives explain that the new policy is aimed at prevention of repeat of situation, when banks’ lending went out of control, thus making borrowers suffer from sharp decreases in the value of multiple properties they purchased.
In the opinion of leading UK mortgage brokers, the move of the Lloyds Banking Group will have a negative impact not only on investors wishing to enter the buy to let market, but also on existing landlords with large property portfolios given the fact that the amount of buy to let mortgage options has already narrowed significantly.
Let us remind that the number of enquiries for buy to let loans increased by more than 50% in the past year, while the number of mortgages available for this type of property purchases fell by 70%.
However, Lloyds Banking Group spokeswoman is determined that the bank’s move is a right thing to do as it will help the lender to effectively manage its buy to let lending.