BTL lenders advised to be hard on defaulters

The announcement that B&B is being nationalized is a stark warning to all buy-to-let lenders. And, whilst treating customers fairly is a business principle that should be applied by all companies, it does not mean treating commercial borrowers like a residential mortgagee, warns Moore Blatch.

Moore Blatch warns that, whilst repossession for any defaulting borrower should be the last resort for financial reasons, lenders should move swiftly in order to minimize any potential losses.

Since the beginning of 2007 the number of buy-to-let mortgages outstanding has risen by over 215,000 to 1,103,000. However, over the same period, the number of loans in arrears by over 3 months has almost doubled to 1.1%, and the number of properties taken into repossession has trebled to 0.21%.

Paul Walshe, head of lender services, Moore Blatch, comments; “Repossession is the last resort for all loans and everything possible should be investigated first. In a falling market, a lender may be better advised to take a marginal loss in terms of monthly income if the property is let, rather than crystallize a loss by repossession. However, this needs to be a commercial decision as the borrower is a business and the same rules do not apply as for residential customers. Buy-to-let lenders need to act swiftly and decisively, and with the same duty of care that they would with any customer, but it must be remembered that buy-to-let borrowers are business people and need to be treated as such.”