Credit crunch was great for portfolio landlords

Ryan Bembridge

October 12, 2016

To Let

The credit crunch was the “best thing” that could have happened for landlords with established portfolios.

That’s the claim made by David Lawrenson, owner of property consultancy

Writing on the LettingFocus website, Lawrenson said established landlords have profited from low interest rates, especially those on lifetime trackers.

Mortgage broker blasts ‘zombie’ buy-to-let lenders

And he said they also benefitted from inflated asset prices, meaning they should “give a hug” to those “clowns” who contributed to the collapse of US bank Lehman Brothers on Wall Street and in the City of London.

Lawrenson wrote: “The credit crunch which started eight years ago was a great thing for landlords with established portfolios.

“Anyone with large borrowings in 2008 will have enjoyed seeing their mortgage rate(s) suddenly plummet.

“And as borrowing rates fell, the price of anything that could count as a “real asset”, (and there is nothing more of a “real asset” than property), started to rise – and sometimes rise very fast.

“The restrictions on lending that came in as a result of the crisis added another fillip. Suddenly loans were in short supply and hard to get, which meant folks could not easily get new mortgage finance – at least not for a while.

“This meant more would-be homebuyers found they had to rent for longer, pushing up demand for rented accommodation even more. Another boost for the landlord community.

“So, if in 2008, you already had mortgages that backed previous property purchases – and especially if those mortgages were on base rate trackers, (as many buy-to-let loans were), it was very happy days indeed.”

Lawrenson acknowledged that the credit crunch caused “winners and losers”, as things haven’t been so rosy for people not yet on the property ladder or savers.

John Heron, director of mortgages at buy-to-let lender Paragon, gave a mixed response to Lawrenson’s views.

He said: “There’s no question interest rates fell since the financial crisis and with Brexit they will be low for a long time.

“Clearly that has changed asset values. Does that favour landlords over other mortgage borrowers? Not particularly.”

But Lee Grandin, managing director of large portfolio-focused buy-to-let brokerage Landlord Mortgages, thinks Lawrenson’s analysis is spot on.

He said: “He’s correct. Whether it’s right or wrong that’s where we are. I can only see the portfolio landlords that were established pre-credit crunch surviving.

“A lot of those landlords are sitting on rates as low as 0.39 over base for life and if they’re sitting on 300 properties that’s powerful.

“Bear in mind a lot of loans pre-credit crunch were very low as well.”