Lenders ‘blinkered’ by BTL trusts

Ian Handley, director of Truestone Private Finance, said in his experience only two lenders, Norwich & Peterborough and Skipton BS, would do BTL trusts. He believed lenders were missing out on a good investment vehicle in light of more parents looking to ensure their children could get onto the property ladder when they get older.

He said: “Trusts are not always easy to do, but it’s a less risky proposition, as it’s usually high-earning parents and a 70 per cent loan-to-value. I suppose lenders don’t like it because if something goes wrong and the mortgage is not being covered, the lender has to deal with the trust rather than an individual.”

A BTL trust most often has three trustees, whom the lender would lend to as a whole with a first charge on the property.

Handley admitted it was a limited market suited to higher earners, as it would cost about £7,000 to set up a trust.

Ray Boulger, senior technical adviser for John Charcol, commented: “It’s much like lenders not lending to limited companies. The main reason to exclude trusts is the additional complications of underwriting and systems. However, it is surprising so few lenders operate in the market.”