Buy-to-let
Furthermore, buy to let mortgage rates have not fallen by as much as mainstream mortgage rates following the decreases in the Bank of England base rate. Since June last year the average rate for mainstream mortgages has reduced by 2.6 per cent, whilst buy to let rates have only fallen by 1.51 per cent.
Banks are also demanding larger deposits from buy to let landlords; there are no buy to let mortgages left at 85 per cent loan to value, meaning prospective landlords will need at least a 25 per cent deposit to secure a mortgage.
Louise Cuming, head of mortgages at moneysupermarket.com, said: “The credit crunch has killed off the majority of buy to let deals. Because banks view buy to let borrowers as riskier than normal customers, the deals that are still available require an extra large deposit.
“Even if you are lucky enough to have a sufficient deposit and have found a suitable buy to let mortgage, you must watch out for the fees levied on arranging the deal, as these can be extortionate.
“On top of all this, banks are also increasing the minimum rent they require landlords to charge. In 2007 the average requirement was for the rent to represent 112 per cent of the mortgage payment. The average requirement now is for rent to cover 123 per cent of the mortgage payment. However, this is against a trend of falling rents. Over the past twelve months rental property supply outstrips demand and it is a tenants market. The average rent now stands at £819 in comparison to £873 in April 08.
“The buy to let mortgage market is like a ticking time bomb; the uncompetitive nature of the products on offer does not reflect the need in the market from current landlords, and if nothing changes, this is a sector of the market that will continue to suffer.”
