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Tuesday, August 26, 2014

The rise of the pretend landlords

With property increasingly unaffordable against wages, and with an ever stringent lending process on residential mortgages, desperation has lead some buyers to pretend to be landlords - the shame.

Increasingly desperate buyers, including FTB's are pretending that they will be letting out a property, and applying for a BTL mortgage, when in reality they are wanting to live in the property.

The Telegraph has reported that a leading mortgage broker has seen a 46pc rise in the number of buy-to-let enquiries from first-time investors  in May, following the introduction of the more stringent lending requirements on residential mortgages as part of the Mortgage Market Review. This spike in numbers might indicate that many of these applications are not by those wanting to rent out the property.

If caught making these kind of fraudulent mortgage applications a buyer could find themselves stopped from getting a mortgage in the future.

The Financial Conduct Authority is looking into the issue as part of its post-implementation review of the Mortgage Market Review.

A spokesman said: “We are aware that some borrowers might be tempted to make fraudulent applications to get around the affordability rules. Firms need to have procedures in place to ensure that people applying for buy-to-let mortgages do not intend to live in the houses they are buying. This is an area we are keeping under review.”

Meanwhile the issue is affecting the BTL mortgage market, with lenders more wary of lending to legitimate first time landlords and preferring to stick with those with an established rental portfolio.

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