Landlords we live in extraordinary times

Landlords, there is no doubt we are living through extraordinary times.

As I tracked the fall rise and subsequent gyrations of HBOS shares in the market yesterday, thoughts of reality, normality disappear in a sea of conjecture, speculation, fear and panic.

The outcome is that HBOS our biggest mortgage bank will be taken over by Lloyds TSB. As a recent shareholder in both, this is good news for me. The reality is that this is the start of massive financial rationalisation process that will take out a large amount of capacity out of the bloated financial and lending markets as they make the painful adjustment to much less lending and reduced profits for many years to come.

What does this mean for landlords?

Landlords will be undoubtedly impacted by this process. A few years ago Landlords were spoilt for choice with the range of buy-to-let products from a myriad of buy-to-let mortgage providers. This has in the last year shrunk to hundreds of products from a much smaller number of lenders as many have exited the market, unable to access funds in the wholesale markets (ala Northern Rock) or fearful of exposure to a house price crash.

This means that things will get tougher for landlords in the sense that there will be less lenders with less products who will inevitably seeking to extract a higher price for lending as they seek to rebuild profits onto their battered balance sheets.

Looking at HBOS and Lloyds, both have specific specialist buy-to-let lending subsidiaries. HBOS prior to the merger had already announced that The Mortgage Business which was the 7th largest buy-to-let lender by outstanding balances (CML H1 2008) was to cease lending on new business. HBOS also has the Birmingham Midshires brand which was 2nd largest. Lloyds on the other hand owns the Cheltenham and Gloucester which was 5th biggest. The chances are that the new Lloyds will rationalise their lending, cutting out brands and products.

Beat the credit crunch - 4 leading buy-to-let brokers - 1 FORM

This will not effect existing lenders or their outstanding buy-to-let mortgages. However, lending for new landlords and for those looking to remortage will never be quite the same as we move into an era of consolidation and contracting credit.