A panel of industry players have warned the broker community to be aware of the potential for borrower clients to try to ‘game’ the buy-to-let market in light of the tighter affordability rules for residential mortgages introduced by the Mortgage Market Review (MMR).
Speaking at an industry debate at yesterday’s Financial Services Expo Manchester, James Chidgey of Nationwide Building Society, Martin Reynolds of Simplybiz and Charles Haresnape of Aldermore all referred to the greater potential for borrowers, who couldn’t secure residential mortgages in the new regulatory environment, to try instead to secure an unregulated buy-to-let mortgage.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI) gave one example from a lender with both a residential and buy-to-let proposition. He said the lender had rejected a residential mortgage application for a particular property only to find three days later a buy-to-let application entering its system from the same borrower for exactly the same property.
Chidgey said: “We have been alive to ‘gaming’ for some time. It is very important that advisers are clear about this and you do need to question the client carefully that they are doing buy-to-let.”
Reynolds added, “Gaming? It’s fraud.” While Haresnape warned brokers that the FCA “are keeping a big eye on this”.
Most panel members were however agreed that the buy-to-let market as a whole would grow over the course of 2014 and beyond. David Whittaker of Mortgages for Business said: “Buy-to-let is coming from a strong performance in 2013 with £21.5 billion of business which is about 12/13% of total gross lending however we might get up to £28 billion this year which would be around 15% of the total market.”
However other panel members were less than enamoured with the growth of buy-to-let. Rob Jupp of Brightstar Financial said: “I think the expansion of the buy-to-let market is the root cause of the problems we have in the housing market. I don’t think it’s a great thing that the buy-to-let market is growing.”