A bespoke mortgage product aimed specifically at buy-to-let landlords looking to invest in the rapidly growing concept of Private Sector Leasing (PSL) is being launched by Dunfermline Building Society and Orchard & Shipman plc.
The bespoke mortgage, with a starting rate of 6.19% pa for five years fixed, typical APR 7.1%, is set to make PSL investment – which has proved to be a huge success since it arrived in Scotland in 2005 – more accessible.
The first PSL contract in Scotland was signed between Orchard & Shipman plc and The City of Edinburgh Council (CEC) in September 2005, with the company required to find 1500 properties by 2010.
Such has been the success of the Edinburgh scheme that Orchard & Shipman has already secured its 1,000th property – two years ahead of target – and the scheme is already the largest of its kind in the UK.
Andrew Morrison, Director of Policy and Development at Orchard & Shipman, said the tie-up with Dunfermline Building Society arose after they became aware of difficulties investors were experiencing in obtaining finance through conventional mortgages.
He said: “We have been working hard to raise awareness in the financial sector of the attractions of PSL investment.
“However, some lenders wrongly had misgivings that the scheme is dependent on housing benefit being paid or would be a poor investment because of the stigma of homeless tenants.
“This led the Scottish branch of the Council of Mortgage Lenders to invite us to their branch meeting in March which provided the perfect opportunity to explain to lenders the benefits of PSL, for example, the guaranteed secure rent and the return of property in good condition. As a result, Dunfermline Building Society, who was at the meeting, made contact with us about creating a dedicated PSL mortgage for Orchard & Shipman landlords – the first of its kind.”
Simon Cocker, Head of Business Development at Dunfermline Building Society, said: “As the largest lender to housing projects in Scotland we are looking forward to our partnership with Orchard & Shipman. The ethos of a building society is to help people get into their own homes, exactly the same as Orchard & Shipman, so this will be a very good fit for all parties.
“We currently have some great deals on the mortgage market and a reputation for putting together innovative market leading products, so I have no doubt Orchard & Shipman clients will be able to make the most of our product offerings.”
PSL allows councils to provide quality accommodation to people who may have lost their homes through, for example, relationship breakdown or unemployment, and who would otherwise find themselves faced with temporary housing options such as expensive B&B accommodation.
PSL appeals to private landlords as it offers the security of guaranteed long-term income, rents paid quarterly in advance with no voids and no agent’s fees – and the return of the property in good condition.
A survey of the Edinburgh PSL scheme showed that a phenomenal 96% of tenants and 100% of landlords describe the service as ‘good’ or ‘excellent’ and with 6,000 landlords and investors registering an interest the continuing success of the scheme seems assured.
Orchard & Shipman has now signed new contracts to deliver PSL schemes with Midlothian, East Lothian and Scottish Borders Councils, extending the investment potential outside Edinburgh and making the timing of the new mortgage launch crucial.
Orchard & Shipman are now looking at developing further contracts with other Scottish local authorities, as PSL is expected to play an increasing role in helping councils achieve achieve Scottish Parliament targets to give every homeless person the right to a home by 2012.