Funding for lending extension ‘a boost to landlords’

It is thought that buy-to-let landlords, including those considering products like Rent Guaranteed from Advanced Rent (http://www.advancedrent.co.uk), should be boosted by the Bank of England’s recently announced extension of the £60bn Funding for Lending scheme until January 2015.

The Funding for Lending scheme was conceived with the aim of incentivising lending to SMEs. With landlords that have an annual turnover of less than £25m being classed as SMEs, many individuals with a rent guarantee insurance policy should be among those to benefit in the form of increased capital.

So that more funding for SMEs can be obtained, lenders will have the ability to draw £5 from the scheme for every £1 of net lending to SMEs in 2014, as well as £10 in 2014 for every £1 loaned in the rest of 2013. Participants using the FLS to source cheap credit will find that when they invest in landlords, that capital will be subjected to a five times multiplier in 2015 and a 10 times multiplier in 2014.

Although the changes to the scheme do not have a direct impact on the ability of a prospective recipient of landlords rent insurance to secure mortgage lending, the scheme now presents participating lenders with a greater incentive to lend to SMEs in the form of, for example, business loans. It is thought that the extra capital that buy-to-let landlords may therefore be able to obtain will have an indirect effect on buy-to-let mortgage rates and the market as a whole.

The greater amount of cash available should drive demand for funding among landlords, meaning that in order to keep pace, supply will need to be improved, equating to lower mortgage rates. According to the Council of Mortgage Lenders, there was an increase in buy-to-let lending as a percentage of total gross lending from 9.8 per cent in 2011 to 11.5 per cent in 2012, or to £16.4bn from £13.8bn.

Even under the existing FLS, however, landlords have benefitted from lower borrowing costs passed onto them by banks and building societies, with financial data provider Moneyfacts stating that there had been a drop in the average buy-to-let rate from 5.09 per cent in August, the month of the launch of the FLS, to 4.28 by late April. This contributed to a 19 per cent rise in buy-to-let lending in 2012, meaning a four year high in the number of buy-to-let mortgages.

Although the government has generally targeted its recent initiatives at the invigoration of the housing market by giving assistance to owner occupiers, FLS is the sole scheme from which buy-to-let investors have not been specifically excluded.

This has only increased the amount of attention that the scheme has received from prospective landlords, many of whom may also be interested in the ability of Advanced Rent’s (http://www.advancedrent.co.uk) rent indemnity products to boost their financial security and place them in a better position to expand their portfolio.

Editor’s Note: Advanced Rent (http://www.advancedrent.co.uk) are represented by the search engine advertising and digital marketing specialists Jumping Spider Media. Email: info@jumpingspidermedia.co.uk or call: +44 (0)20 3070 1959 / +34 952 783 637.