Buy-to-let thrives on foreign liquidity

The top end of the UK buy-to-let (BTL) market has continued to thrive, despite the ongoing liquidity crisis, thanks to the influence of European banks.

That is according to new research from mortgage planner HFM Columbus, which finds £1 million plus BTL have all but disappeared in the UK, leaving the door open for German, Swiss and Israeli banks to assume market share.

Included in the new influx of lenders are Sweden’s Handlesbanken bank, Germany’s Kleinwort Benson, Israel’s Bank Leumi and Switzerland’s EFG Bank.

"Our own lenders have effectively pulled the plug on this market altogether," said HFM Columbus mortgage specialist Gary Festa.

"But where do buyers go when they want to get their hands on the big money? Current market conditions have given rise to tremendous buying opportunities, and now we have a situation where foreign investment banks are swooping," he added.

A recent example cited by HFM is Handelsbanken, which offered a client up to £2,000,000 at 1.4 per cent above bank base, initially for three years when the rate would be reviewed.

The bank is also prepared to offer an offset facility alongside this loan – but no UK lender wanted to touch anything above £1,000,000, finds HFM.

"The best we could find via traditional UK lenders is 1.6 per cent over Bank of England base rate – and it is just not competitive," added Mr Festa.

Furthermore, HFM points out nearly all of the traditional lenders’ schemes on BTLs of up to £1 million have early redemption tie-ins of between two and three years, whereas foreign owned banks tend to have none.

This again makes the UK uncompetitive.

Chris O'Toole