A dramatic reduction in the number of buy-to-let mortgages available is set deter would-be landlords preparing to invest in the sector.
Since March the number of buy-to-let deals available has diminished from 2,897 to 1,593. That means more than 1,300 products have been pulled as a result of the Covid-19 pandemic.
According to Moneyfacts.co.uk, which has compiled the data, lenders are currently focusing their efforts on existing customers because of the impact of coronavirus. Many will be supporting borrowers who are taking up the offer of mortgage holidays.
The lack of options will particularly hit those landlords looking at investing in the market with small deposits. Moneyfacts revealed new borrowers with a deposit of just 20% who require a loan at 80% of the property’s value could choose from only 35 fixed-rate deals.
And, as an added blow to borrowers – both new and old – who need loans for 60% or 80% of their property’s value, rates have also increased since March.
Tax changes
The ‘shake up’ to the buy-to-let market couldn’t have come at a worse time as it coincides with changes to the tax rules on buy-to-lets.
From 6 April mortgage interest relief, which allowed landlords to deduct mortgage expenses from rental income to reduce their tax bill, was completely phased out.
Rachel Springall, explained the changes made due to coronavirus were aimed at protecting providers’ existing mortgages. And she thought prospective borrowers who didn’t have ‘decent’ deposits may well be discouraged from investing in the property market.
She added: “Existing customers could well be looking to cut down their monthly loan payments or indeed are concerned about rental payments.
“Thankfully, lenders will allow borrowers to defer their mortgage repayments for three months as of last month, but landlords must act now and check online to see how tenants falling onto universal credit or local housing allowance could impact their rental cover ratio.
“As interest rates rise, landlords would be wise to move quickly to remortgage.”
She added: “It’s vital landlords consult a financial adviser and keep in regular contact with their tenants to get through these uncertain times.”
| Buy-to-let market analysis | |||
| Product numbers | Mar-20 | Today | Difference |
| BTL product count (fixed and variable) | 2,897 | 1593 | -1,304 |
| Two-year fixed rate BTL all LTV’s | 914 | 507 | -407 |
| Two-year fixed rate BTL at 60% LTV’s | 124 | 129 | 5 |
| Two-year fixed rate BTL at 80% LTV’s | 141 | 19 | -122 |
| Five-year fixed rate BTL all LTV’s | 1,000 | 556 | -444 |
| Five-year fixed rate BTL at 60% LTV’s | 133 | 139 | 6 |
| Five-year fixed rate BTL at 80% LTV’s | 150 | 16 | -134 |
| Average rates | Mar-20 | Today | Difference |
| Two-year fixed rate BTL all LTV’s | 2.77% | 2.58% | -0.19% |
| Two-year fixed rate BTL at 60% LTV | 1.89% | 2.24% | 0.35% |
| Two-year fixed rate BTL at 80% LTV | 3.56% | 3.76% | 0.20% |
| Five-year fixed rate BTL all LTV’s | 3.24% | 2.98% | -0.26% |
| Five-year fixed rate BTL at 60% LTV | 2.31% | 2.62% | 0.31% |
| Five-year fixed rate BTL at 80% LTV | 3.98% | 4.19% | 0.21% |
| Source: Moneyfacts Treasury Reports | |||
If you have a question regarding your buy-to-let mortgage, our expert Jeni Browne at Mortgages for Business may well be able to help. Click here for her latest Q&A and information on how to submit your question.
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