Landlords are having to borrow more as a result of rising property prices and the tougher stance by lenders on criteria and rental calculations.
New research from The Mortgage Broker shows landlords borrowed an average of £15,000 more to purchase property in 2016, compared with the previous year, with the average loan increasing in 2016 to £185,188, from £170,268 in 2015.
The average loan to value dropped from 61.6% in 2015 to 59.7% in 2016 and the average deposit rose by 18.5% from £105,605 in 2015 to £125,016 in 2016.
Landlords and investors paid an average of 12.7% more for their properties year on year, with the average property price sitting at £310,265 in 2016, compared with £275,286 in 2016.
According to the Council of Mortgage Lenders, gross buy-to-let lending in November was the highest monthly level since the stamp duty changes on second properties were introduced last April.
Landlords borrowed £3.2 billion in November 2016, up 10% month-on-month, but down 9% year-on-year.
Darren Pescod, managing director of The Mortgage Broker, said: “Landlords are certainly feeling the pinch, but the raft of tax changes that came into force in 2016, do not appear to have dampened the buy-to-let market. In many towns and cities, landlords have increased their investment in buy-to-let property, despite the financial challenges that have been recently thrown at them by the Government.
“Our research shows that landlords are finding larger deposits and increasing their borrowing to secure property. With mortgage interest rates so low and the demand for rental property booming, the market still provides a great investment opportunity.
“Though the stamp duty additional levy and income tax changes that come into force in this tax year have slowed down this sector it terms of the number of applicants applying for new buy-to let mortgages. This may lead to some consolidation with larger landlords, scooping up rental opportunities in their local area and beyond. Our view is that smaller landlords with fewer than three properties may find it financially tough and will pull out of the market.”
