BTL lenders say no to new builds

Posted on 6 May 2008 by Katie Tucker

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HBOS has announced that as of 5pm today, they require at lest a 25% deposit for all Buy to Let new build flats / apartments including newly converted (within 12 months of application) and previously unoccupied flats.  This comes in the wake of Saffron Building Society and Heritable ceasing lending on BTLs for new builds all together, and Chelsea lending no more than 50% of any new build's value for BTL, and 90% for residential properties.   West Bromwich, and Accord, Mortgages Plc and Preferred will lend no more than 75% loan-to-value.

HBOS's decisions are always symbolic as they are the biggest player in the market and other lenders follow their policy, so more of this can be expected. Lenders are cautious that new builds are the most overpriced at sale, depreciate the quickest and in the case of buy-to-lets, can be the hardest to let out: a flat in a block of 20 identical ones offers no unique features, so rent undercutting is the only way to attract tenants.  When they all do this, the average drops considerably.

The cycle is dangerously perpetual however: if lenders withdraw from new builds because they are worried the values will drop the borrower into negative equity fastest, borrowers won't be able to get finance, causing lower demand, and further drops in value.  If you have a large deposit, and there is a new build flat that looks to be genuinely good value, and you are looking for a long term home for yourself (not to let) then this might be a good time to snap up a bargain.

 

 

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