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BTL entrants warned to watch out for credit risks

Paragon Group director of mortgages John Heron has warned new buy-to-let lenders they could expose themselves to a higher level of risk if they underwrite BTL loans in the same way as owner-occupier mortgages.

Heron says many new BTL lenders restrict their mortgages to private individuals who have one or two properties or single self-contained properties and use the systems and processes they have in place for owner-occupier business.

He says: “New BTL lenders could be missing an understanding of the customer’s total activity as a landlord and may not be making a fully informed credit decision. That could be bad for lenders and borrowers.”

Skipton Building Society and Norwich & Peterborough Building Society returned to the BTL sector in March and May respectively, while Yorkshire Building Society entered in August.

Abbey for Intermediaries and Metro Bank have also announced their intentions to move into BTL lending.

Mortgage Concepts Associates director Mike Richards says: “Lenders have to treat BTL customers differently and look at their whole portfolio before making a decision to lend.”

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