This is the question I keep on asking to myself to try and predict the short term future.

It looks a bit tough for the next 3 months.  Banks will lend but they will be extra cautious.  Previously with buy to let mortgages they never credit scored you they just credit checked you.  This meant as an investor you were not penalised with making multiple credit searches as this is what you are expected to do if you are buying multiple properties!

Now however, like a sledgehammer to a nut, underwriters are now credit scoring buy to let investors.  Seems ridiculous to me but that is just the time we are in.  I do not even question the ridiculousness of whatever these lenders come up with as they are in a ridiculous situation.

However I am sure of one thing: The bank system will not go down.  This is because the government will step in.  So banks will always be here.  So how bad are the banks hit?  I do not reckon it is that bad.  Banks have massive accumulated profits they sit on.  So if for example Barclays was sitting on £5bn of debts they had to write off this would just effect their current balance sheet (and this years profit which is basically historic) and they would move on.  So in effect Barclays get revalued down from £25bn to £20bn.  Arr poor Barclays.......I must get the violins out!

For a bank to make profits in the future they HAVE to lend.  If the bank makes the right incentives to their lending dept employees it will be soon back to their old ways of calling you up offering you a loan.  And it may come back with a vigour.  If the banks are trying to make up the £5bn loss they posted earlier they could just coming at you like mad.  I could be being over optimistic here but if a bank is clever, they can identify the good borrowers and hit them with loans they simply can't refuse.

The bank may even question what is a better loan:

1. A 70% loan to value residential mortgage to a 30 year old first time buyer OR
2. A 100% loan to value buy to let mortgage to a 36 year old 10 year experienced buy to let investor who has negotiated  hard on the deal that he or she is buying

Now if they favour borrower number 2 you can be damn sure I will be knocking on their door to buy EVERY single property in the whole of the UK under £40,000.

First time buyers will face it hard.  There is no history and quite frankly banks may just chase us as we have got the history of paying on time and in full.

So lets just see what happens from now.  There are 3,000 buy to let mortgage products currently so lets go out and get ‘em!

 

Ajay

Posted on: 3rd Oct 2008