Landlords can still get a mortgage with no income – no wonder the housing market is broken’

By Martin Stewart - 30 Jun 2023

Buy-to-let mortgages need to have greater regulation and this will benefit all parties

The mortgage crisis and the havoc it’s wreaking has shown how broken our housing market really is. In my view, after a long career as a mortgage broker, the significant if not primary cause of this is the bloated private rental sector, which has been funded by cheap money.

Around 2.74 million landlords own 20pc of Britain’s housing stock, with an average portfolio of eight properties, and have leveraged themselves with £1 trillion of debt in the process.

If you had no income in 2007 you could have been offered a mortgage.

Thankfully, that practice was banned. But in the buy-to-let world it is still alive and well, as some lenders don’t require property investors to have a minimum income.

A landlord’s barrier to entry is only a deposit, while for first-time buyers the barrier is often income – something that is far more difficult to come by than a windfall from an aged aunt.

Furthermore, some lenders will allow landlords with income of £25,000 to build up a portfolio of £1m to enable them to house others, but may only be prepared to give them £100,000 to house themselves. On any metric that is unfair, unsuitable and – as we are now seeing – systemically unstable.

So, I firmly believe buy-to-let mortgages need to have greater regulation.

This is for the benefit of all parties – tenants, lenders and landlords. And now is the time; it makes sense to fix things when they are clearly broken. Landlords are now seeing 100pc increases in their mortgage payments, making a once-profitable business loss making overnight.

And if landlords struggle, tenants will also struggle, and that needs to be addressed. Providing shelter for another human comes with great responsibility, and the past 20 years has glossed over that with a glib wave of the hand, mainly because money was cheap.

It no longer is, and that shelter is now looking vulnerable.

I did a poll recently asking if people thought buy-to-let was an investment or a business. The result wasn’t as clear as you might expect, which suggests even the landlords themselves don’t know what it is they have.

I’d encourage anyone entering the market now to speak to a financial adviser and accountant before even thinking of approaching a mortgage broker.

To my mind, only then can you decide if a buy-to-let property works for you – and you may also see that there are much better, cheaper, more tax-efficient and more liquid places to put your £100,000. Options that won’t call you at 2 o’clock in the morning telling you the sink is blocked and the kitchen has flooded.

Investment Synergy - The housing market - state of it - owners- renters- BTL has been broken, mis managed and speculated on for far too long, it is a dominant factor in the UK and a skewed indication of the stability of the UK ... just let it ¨be¨

find a level... the renters are the most vulnerable ...