Landlord Mortgages, a buy-to-let broker, has warned that lenders should adhere to stricter criteria when providing 100% residential mortgages to novice landlords as such inexperience is likely to increase the chance of arrears and repossession.

Lee Grandin, managing director of Landlord Mortgages, said: “Lenders are potentially setting financial traps for novice landlords with 100% mortgages, forcing them to handover their entire rental income to the lender each month, leaving them open to arrears if there are problems with rent collection. Landlords should always keep a 20% reserve up their sleeve, in case things go wrong.”

Landlord Mortgages also inferred that the Council of Mortgage Lenders were aware that lenders were over-lending to novice landlords by putting in place preparations to deal with the auctioning of repossessed properties that would not be covered by these mortgage deals. However, CML strenuously denies this.
Bernard Clarke of CML told PIN: “We are not a mortgage lender so would not have anything to do with the auctioning of properties. We won’t release buy-to-let lending figures until later in the year, but figures point to prudent lending in the buy-to-let sector.”