Portman decides to shun buy-to-let mortgages on new properties

Portman decides to shun buy-to-let mortgages on new properties

	Published : Sun, 11 Dec 2005 21:05 By : Richard Owen Print this Story

LONDON - The Portman Building Society has decided not to offer buy-to-let mortgages for any new properties, thus becoming the first lender in the country to do so. The company said that it would only offer mortgages on properties that were at least a year old.

Portman, which runs the business through The Mortgage Works, said that there was an oversupply of new homes and therefore it had decided not to venture into an area that had become “more of an art than a science".

"We have over-lent in some cases. And we don't want to do more. We are jumping out of this market before there is any chance of the Portman losing money. We would rather be prudential and pull out rather than not getting the risks right," said Matthew Wyles, the Director of The Mortgage Works.

Portman's decision is a further blow to the buy-to-let sector, which was already reeling from Chancellor Gordon Brown’s decision to scrap the tax breaks on second homes under the SIPPs scheme. Mr. Wyles said as much, "We will go back into new-build buy-to-let when we believe that the market forces of supply and demand have reached equilibrium."

He added that many developers were prepared to deal outside the contracts and in such a situation; the lender is unaware as to what he is letting himself in for. This means that the sale price which is agreed is often well-above the true market value of the property.

"We want our customers to have a share in the equity of the property because those that don't are usually the first to default. We don't need to be in this risky market so we won't be," Wyles stressed. Portman was not going to support customers with negative equity, he concluded.

Several building societies have expressed their disappointment with Portman's decision. "Although the buy-to-let market is not as strong as it has been in the last few years, it is still a market with potential and there are more realistic returns now," said Zoe Barnes, a spokesman for SmartNewHomes.com. The latter happens to be the largest site in the UK for new home sales.