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Tuesday, January 21, 2014

let lending goes mainstream

let lending goes mainstream

Views BlogsLiverpool BlogsCommentLettersSend a Story Video or PictureTHE decision of Alliance Leicester to offer buytolet mortgages later this year reflects how this type of lending has now become a permanent feature of housing finance.

A will source this business through its Bootlebased Alliance and Leicester Commercial Bank which until two years ago was known as Girobank.

A is the UKs seventhlargest home loans lender. But like other major lenders it tends to only deal with buytolet borrowers via intermediaries The funds will also come from an outside source, as yet unnamed but a potential candidate could be GMACRFC, an offshoot of General Motors financial side which has now become the UKs 10thlargest provider of mortgage finance.

From the mortgage providers side, another new development is that Chesterbased TMB The Mortgage Business plans to launch a product which it calls HousetoHouse. The aim of this is to enable homeowners who want to enter the buytolet market to take advantage of the increased equity many now have locked in their main residence.

Nigel Payne of TMB has already held several roadshows to explain the concept to intermediaries ahead of a planned summer launch.

TMB also has a multi buytolet product that can be used to finance portfolios up to but with no single property being worth more than employs about 200 in Chester and is part of HBoS Halifax/Bank of Scotland, now the UKs fourth largest bank.

In mortgage industry statistics, buytolet comes under the category of nonstandard lending. This covers any loan with a higher than usual interest rate. Nonstandard also includes selfcertification mainly for the self employed and accounting for 6% of all mortgages and subprime lending to those with bad credit records.

Together, the three sectors now account for near a quarter of all mortgage lending. Buytolets share is estimated to be about 8.5% and the average interest rate charged is 1.95% against the standard level of 1% over base.

Although these three areas of lending are very different, they do share two characteristics. One is that the major lenders all handle them through separate specialists and not at local High Street branch level.

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