A reality check

Grant Bather

February 23, 2008

It seems that every week more detractors of our industry arise. It’s true the media loves to build people up to knock them back down. It is also true that the lending figures for January were a peg down, but just a peg – not a whole washing line full.

Front-page headlines suggest repossession numbers are running at critical levels, when the reality is you need decimal points (0.23 per cent of all loans to be exact) to accurately describe the predicament; woefully unhelpful, but regrettably unavoidable.

It’s ironic then that this week I was approached by a global television station because its viewers, who are predominantly from overseas, were keen to understand more about investing in property here.

Many positives

The truth is that UK property investment has many positives going for it. The most important factor to consider for landlords is the supply of tenants. This sector is abundantly rich with first-time buyers unable to secure finance and more teenagers going to university.

Job mobility is also more prevalent than ever before with demanding employers posting their staff in all pockets of the country. Immigration is welcomed, and the government is dangerously short on social housing and looks to the private landlord to assist. Unemployment is also low, which is likely to reduce the possibility of rental voids.

Current rental yields are roughly 5 per cent when the interest rates sit slightly above, but fundamentally buy-to-let is about capital appreciation over the mid to long term rather than monthly income. Although house price inflation is flat, property values are destined to rise again.

So how difficult is it for overseas investors to buy here in the UK? Well there are about a dozen established lenders in the field and they lend to all nationalities apart from those on the Financial Task Force hit list.

The hardest requirement to fulfil is probably setting up a UK bank account for monthly payments to be made from. It’s therefore sensible to include this task when visiting the UK to assess the properties they wish to purchase.

The bank will, of course, undergo the money laundering and identification checks, so it’s wise to bring a driving licence to accompany their passport. There are several hundred mortgage products to choose from so independent mortgage advice is prudent, and therefore the same verification documentation would need to be handed over to their adviser.

If the applicant is unable to visit the UK then verification becomes harder but not impossible. Among the dozen lenders there are global banks that have branches all over the world that would be able to substantiate who they were. Likewise, if the applicant was an expatriate they could call on the British Embassy to verify them.

What we’re talking about here is essentially buy-to-let from across the sea. So affordability will be assessed on a standard rental coverage basis. If earned income is also required to cover the shortfall, the self-employed will need to have an accountant with internationally recognised qualifications; the employed would be viewed more favourably if they work for a multi-national organisation.

The minimum deposit level is typically 15 per cent, the same as buy-to-let, but a 25 per cent deposit opens up more options.

A good tip is to arrange for an English-speaking friend to come with them. Having to translate the application form will also certainly add to the lender’s processing time.


Leeds Building Society has introduced some products for shared equity/affordable houses. The scheme is applicable to an applicant who is buying in conjunction with a third party, for example, a registered social landlord or builder.


CHL Mortgages has decided to limit its portfolio maximum to £1.5 million for the moment to ease the processing requirements. It now also lends in the Isle of Wight through selected channels.

GMAC-RFC’s two-year fix with 100 per cent rental coverage has been withdrawn.

The Mortgage Works has made the headlines with its new 15-year fix for buy-to-let. Maybe there is a strategy shift towards a greater emphasis on retention within Nationwide Specialist Lending (see UCB Homeloans in the self-cert section below).

Wave no longer allows first-time buyers on its rental income scheme.


Salt, the specialist lender of Derbyshire Building Society, has explained its philosophy behind its underwriters’ approach to self-cert. This includes a detailed breakdown of acceptable reasons which can be viewed in its latest product release.

UCB Homeloans has given extra impetus to its unusual 10-year fixed product by lowering the completion fee.

The Mortgage Works minimum trading period for adverse self-cert is now 12 months.


Morgan Stanley’s lender Advantage has pulled out of the mortgage market. Although it was probably best known for its non-conforming lending, it also offered a prime co-ownership product – Flexishare – which enabled key workers to get onto the property ladder.

GE Money Home Lending brands First National and iGroup have chosen to reduce their loan-to-values (LTVs) for Northern Ireland and right-to-buy, to 80 per cent and 85 per cent LTV respectively. It also now has a minimum property value of £70,000 (£80,000 on selected products).

Swift has temporarily suspended its first charge and buy-to-let offerings.

GMAC Partners has priced some of its products up by a full 1 per cent. It has also lowered its LTV to 60 per cent.

Platform’s new medium adverse range has a maximum of 75 per cent LTV.

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