Buy to let lenders increase portfolio limits from £2million to £5million

Mortgages for Business, the specialist buy to let mortgage brokerage, reports that January has seen a number of buy to let mortgage lenders moving portfolio lending limits upwards.

The traditional ceiling on buy to let portfolio mortgage lending has been £2 million over the whole property portfolio. This figure acts as a safeguard for the mortgage lender so they do not over exposure themselves to risk on one borrower’s portfolio. However, the £2 million figure now appears to be insufficient for market needs and specialist buy to let lenders including Mortgage Express and Capital Home Loans have increased this figure to £5 million.

The £2 million figure based on current average house prices of approximately £190,000 and average borrowing at 85% loan to value would equate to approximately 12 buy to let properties.

Jonathan Moore, Head of Marketing at Mortgages for Business, comments: “Professional buy to let investors and those who have been investing using buy to let mortgages since their inception 10 years could now have reached the £2 million boundary. A number of buy to let mortgage lenders target their products at the professional buy to let investor who accounts for the majority of transactions in the market. For this reason lenders are reacting to the needs of the professional investor in the market.”

Despite the hype surrounding buy to let investment and its new entry investors, the amateur investor is still very much sitting in the market’s passenger seat. According to 2006 Council of Mortgage Lenders statistics the large portfolio landlord remains dominant - 13% of landlords own 74% of the buy to let stock, and more striking 53% of landlords own a mere 3% of the stock.

“It is for this reason that some lenders will seek to target the professional buy to let investor with their mortgage products. Lenders must have seen an increasing pattern of investors reaching the £2 million in 2006, and in turn made the decision that these limits were restrictive in attracting portfolio business,” Moore adds.