It is generally perceived that as you build up your credit history, financial portfolio and investment experience, you’ll be better positioned to access and successfully receive new forms of debt. The reality, however, is far more complex. The wealthier someone is, the more complicated their finances become.
Looking at the current climate, the COVID-19 pandemic presents a new host of challenges for UK property investors. While the UK Government has been routinely announcing new measures to support businesses and consumers, it is still not known just how and when the virus will be contained. This uncertainty has resulted in investors and banks slowly becoming more risk averse.
On 19 March, the Bank of England took the decision to cut interest rates to an historic low of 0.1%. With the rate of interest repayments becoming lower, one would naturally anticipate a surge in applications for mortgages. Afterall, property is traditionally positioned as a safe-haven asset able to maintain its value and recover from volatile trading periods. However, this assumption overlooks some of the inherent challenges faced when attempting to arrange a mortgage.
The mortgage struggles of property investors
To understand the challenges faced by property investors, Butterfield Mortgages Limited (BML) surveyed over 750 UK individuals who own three or more properties. The research aimed to uncover the overall experiences of seasoned property investors when applying for a mortgage.
Of those surveyed by BML, 72% felt the process of applying for a mortgage had become significantly more difficult since 2015. The idea that high net worth (HNW) individuals or sophisticated property investors are being denied mortgages may seem strange, but it represents a predictable consequence of the tightening regulations imposed on the sector as a result of the 2008 global financial crisis.