Why the bank bail out is good for landlords

The Government this morning announced a £50 billion part nationalisation of UK banks.

This may seem a million miles away from the day to day realities of many landlords, busy trying to keep their properties let, EPCs done, drains unblocked and roofs water tight. But it has important implications.

Most landlords have borrowed or need to borrow money to finance the acquisition of their portfolio. Many have relied on shorter term loans for funds to refurbish these investment properties ready for letting.

The recent developments on the world capital markets where banks have stopped lending to each other and then have also stopped lending to anybody else because they have been running out of cash. This has proved a severe threat to the business model of many landlords.

We have witnessed the drying up of lending to landlords over the last year where the number of buy-to-let mortgages has gone from thousands to hundreds. Moneysupermarket.com reported last week that the number of buy-to-let mortgages had slumped by 25% in just one week.

The Governments plan, is a bold one and whilst I have been a critic of many aspects of their financial management, this plan should be embraced for it's vision and decisiveness and should provide security for lenders and borrowers. By allowing banks to access funds it should encourage banks to start lending to landlords, even if it is on a much more restricted and costly basis.