With Halloween just round the corner mortgage broker Lee Grandin has taken a swipe at ‘zombie lenders’ that only exist because of government stimuli like quantitative easing.
After the credit crunch he accused lenders of shunning professional landlords that refurbish properties in favour of those looking to make a quick buck.
Prime Minister Theresa May spoke out against QE earlier this month, saying it helps people who already hold assets get richer.
The Bank of England has pumped money into the economy since 2008 through the QE programme.
Grandin said: “Zombie lending is a specific term but I would apply it to any lender who benefits from central government lending stimulus that does nothing for GDP.
“Lenders post-credit crunch targeted easy buy-to-let lending: they shunned professional landlords, discontinued light refurbishment schemes and insisted that every property was lettable before releasing funds.”
He added: “When buy-to-let emerged in 1998 it was a remarkable product because it allowed the rental market to expand very quickly.
“You had a lot of landlords emerging and the clever landlords who were refurbishing were able to create buy-to-let empires.
“Then everyone thought they could be a multi-millionaire.
“Once it’s for everybody it’s bound to crash and that’s what happened with the credit crunch.
“After the credit crunch the same thing started to happen again.”
With the government taking action by introducing a 3% stamp duty surcharge in April and by cutting buy-to-let tax relief from next year, Grandin is surprised all buy-to-let lenders haven’t pulled the plug on lending above 75% loan-to-value.
He said: “You would have expected lenders to make an immediate change but no, they encouraged further borrowing to Tom, Dick and Harry landlords until the PRA got involved.
“Do you think that one of my landlords with 300-plus properties became successful because he or she invested like a zombie?
“Professional landlords often operate as developers and continually improve rental stock and indirectly help the real economy.”
He added: “If the sacrifice in a housing downturn is Tom, Dick and Harry landlords and those lenders who supported then that could be viewed as a small price to pay to find the holy grail of GDP growth.”
Grandin is the founder of Lend2Landlord which aims to take incorporated landlords who have portfolios of 20 plus properties into portfolios of 100, 1000’s and beyond.
Kate Faulkner, property analyst and owner of Designs on Property, said: “Any landlord adds to our GDP because the amount of money you have to spend as a landlord is substantial, and rather more than a homeowner.
“Firstly you pay more tax, then you’ve got agents to fund, you’ve got the inventories to pay for, you’ve got three tenancy deposit schemes, huge amounts on insurance, huge amounts on brokers and lenders.
“Stamp duty is higher than homeowners would have to pay so the idea that landlords don’t contribute to GDP is unfair, whether zombie or professional.”