One consequence of investing in Buy to Let now, in a more cautious market, is that you will probably find that lenders appear to be moving in two directions at once.

On the one hand they are tightening the rules on lending, while on the other they’re actually cutting lending rates for buy to let investors.

What we conclude from this is that if you’re a low-risk bet for a lender, AND you have the right experience, there are some very good deals out there.

Lenders want high quality business from you the borrower.

As property prices, especially in the south of the UK, have risen out of proportion to rents, yields have inevitably fallen. Rises in interest rates have also added to the negative effect.

In response to these factors a significant number of lenders have altered the way they assess a buy to let mortgage application.

An assessment includes such aspects as the location of the property, how much experience the loan applicant has of the buy to let market, what is the likely market rent for the property and how this measures up against the mortgage payments.

It’s normal for lenders to want to be confident that rents on a property will achieve between x1.25 and x1.5 of the mortgage.

In other words, the rent must cover the mortgage payment, plus between 25% and 50% more.

Lenders usually apply their standard variable mortgage rate (SVR) to make this calculation.

But they recognise that, in fact, few buy to let landlords actually pay this rate as it is higher than the fixed, discounted and various other special rates on offer.

Basically the SVR is a notional rate that has been used to work out payments when assessing an applicant’s suitability for a loan.

*  Easier money - for best quality loan applicants

There is growing evidence, though, that this notional rate is being lowered so that lenders can make the calculations work  - but only for those applicants they consider good risks.

For desirable loan applicants, competition is getting more fierce amongst lenders.

Not only will some lenders lower the notional mortgage rate, they will also allow the applicant’s income to be considered as part of the equation.

These then are both ways of increasing the amount of money a suitable buy to let mortgage applicant can borrow.

On the other hand, many lenders are also being more picky about other aspects that they consider, especially how experienced the applicant is in the buy to let field.

Our insider sources tell us that experience will often carry the day even when the rent-monthly mortgage payment ratio doesn’t stack up.

*   What this means for mortgage applicants

For the investor who sees their property portfolio as a steady and relatively conservative investment vehicle, this is good news.

The consequences of the change in lenders’ attitudes is that your credit rating is going to be even more vital than in the past.

In fact, it may well be that you, as an individual, are going to be the central focus of the lender, rather than your business plan.

They are going to want to know about loan defaults in the past and any County Court Judgments you may have.

This makes it more vital than ever to guard your credit rating by making timely payments and not letting your credit score be threatened by dodgy, get-rich-quick property deals.

*   Why it’s good news for buy to letters

Bear in mind that if you are a mortgage applicant, or a prospective applicant with a good credit history, lenders NEED you.  Lending, after all, is what they do.  It’s their business. They’re in competition.

When the market gets sluggish, the lenders will make it easier - for the  right applicants!

Soft prices plus soft finance - if your credit history is good - is an excellent recipe for taking advantage of the market.

Not all lenders will apply the same criteria or give the same weighting to the same factors.

The motto then is:  Shop around!