2015 News and Media

No surprise Bank of England has BTL concerns.

A view supported by our John Davies

The Bank of England (BoE) is right to be concerned about accelerated growth in the buy-to-let (BTL) market.

The BoE recently announced that it will be reviewing standards in BTL underwriting because it is worried that the substantial growth seen in the market could lead to financial instability – a view supported by our John Davies.

John told Bridging & Commercial Distributor: “We are not surprised that the Bank of England has expressed concern about how loosening of lending policies may accelerate growth in the buy-to-let sector and the potential impact this could have on future financial stability.

“Memories of the last financial crash are still fresh in many lenders' minds, but there is a new breed of amateur buy-to-let landlord that has never experienced a property downturn and the impact of negative equity.”

As a short term commercial lender, Just Cashflow's main concern is the borrower's exit strategy and the ability to pay a loan back.

Usually this happens in 1 of 3 ways: selling the asset that was funded, re-financing or selling other assets that they own.

The firm's lending decision is based on a borrower's ability to pay interest on the loan in the event they cannot exit the facility.

John added: “I say, above, we are not surprised by the review announcement and just one of the reasons is a conversation I recently had with a broker who was upset that we couldn't help a customer of his.

“He told us that we knew nothing about bridging or lending in general. In his view, our decision should be all about the LTV.

“He simply would not accept that the customer simply couldn't afford what he wanted to borrow.

“This is a mindset that needs changing.”

Date Issued December 2015.

This article was originally published on Bridging and Commercial

Follow @justcashflowuk on Twitter for more like this.

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