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Tight lending criteria hampering landlords expansion plans

With more consumers relying on stock in the private rental sector than ever before and prospective tenants in abundant supply many landlords are looking to capitalise on the attractive market conditions by acquiring new residential properties.

But tighter lending conditions and the need to raise higher deposits has meant that landlords are struggling to secure the necessary funding to do so. Subsequently demand is continuing to outstrip supply.

According to recent figures for the Council of Mortgage Lenders the number of new buy-to-let loans in the UK has increased by 16 per cent in the third quarter of 2011 from 29,700 to 34,500.

But Graham Kinnear Managing Director at Landlord Assist says restrictive lending criteria is still proving a stumbling block for many and preventing the market from stimulating supply to match growing demand for rental homes.

He says: “Despite the recent increase in the number of buy-to-let mortgages available to landlords it appears that the type of property that will be accepted, together with the onerous deposit and lending conditions, means that fewer applications than previously can tick all of the boxes.

“This is a great shame as there is a clear and growing demand for rented accommodation throughout the UK. Many landlords are attracted by the tangible nature of property, its hedge against inflation and its pension beating yield, but far fewer landlords are able to take advantage of the opportunities that are currently available in the market place.”

Stephen Parry, Commercial Director at Landlord Assist says: “Whilst proposals are in place to permit 30 year mortgages, or mortgages secured with a guarantor, we would much rather see some more traditional lending whereby the borrower can demonstrate that the rental income is more than sufficient to service the loan.

“It is imperative that the supply of rental property increases due to the shortage of quality accommodation available in the UK. More properties on the market will help to stabilise rent prices so we would like lenders to take a more proactive approach to lending.”

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