There has been a sharp decline in the number of buy-to-let mortgage products available due to the coronavirus crisis.
Moneyfacts UK Mortgage Trends Treasury Report data, not yet published, reveals that the Covid-19 pandemic has impacted the choice and cost of deals in the buy-to-let market over the past month.
There has been an overall fall of 1,304 buy-to-let products in the market compared to the start of March 2020, restricting choice for perspective landlords who were preparing to invest in this sector.
Product choice for borrowers at 80% loan-to-value has plummeted on both two- and five-year fixed deals by 122 and 134 products respectively, so there are less than 40 deals combined today in these sectors and average interest rates have subsequently risen as well.
Average interest rates on fixed buy-to-let mortgages have risen for borrowers who have a 40% deposit, rates on both two- and five-year fixed rate buy-to-let products at 60% loan-to-value rose by 0.35% and 0.31% respectively since last month, bad news for those looking to invest or refinance at this loan-to-value.
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Buy-to-let market analysis
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Product numbers
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Mar-20
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Today
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Difference
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BTL product count (fixed and variable)
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2,897
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1593
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-1,304
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Two-year fixed rate BTL all LTV’s
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914
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507
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-407
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Two-year fixed rate BTL at 60% LTV’s
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124
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129
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5
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Two-year fixed rate BTL at 80% LTV’s
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141
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19
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-122
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Five-year fixed rate BTL all LTV’s
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1,000
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556
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-444
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Five-year fixed rate BTL at 60% LTV’s
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133
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139
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6
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Five-year fixed rate BTL at 80% LTV’s
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150
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16
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-134
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Average rates
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Mar-20
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Today
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Difference
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Two-year fixed rate BTL all LTV’s
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2.77%
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2.58%
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-0.19%
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Two-year fixed rate BTL at 60% LTV
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1.89%
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2.24%
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0.35%
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Two-year fixed rate BTL at 80% LTV
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3.56%
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3.76%
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0.20%
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Five-year fixed rate BTL all LTV’s
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3.24%
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2.98%
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-0.26%
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Five-year fixed rate BTL at 60% LTV
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2.31%
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2.62%
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0.31%
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Five-year fixed rate BTL at 80% LTV
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3.98%
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4.19%
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0.21%
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Source: Moneyfacts Treasury Reports
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Rachel Springall, finance expert at Moneyfacts, said: “It is clear as day to see how the virus pandemic and isolation rules have led to a huge shake-up in the choice and cost of buy-to-let mortgages. This couldn’t come at a worse time, as from this new tax year, mortgage interest tax relief has been completely phased out for buy-to-let landlords – which allowed them to deduct mortgage expenses from rental income to reduce a tax bill.
“The fall in choice and rise in interest rates will be a blow to landlords who are considering investing, however the market has moved in this way to protect providers’ existing books. Even if some believe the property market to be ripe to invest in, prospective borrowers who don’t have a decent deposit could well be discouraged.”
Springall 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.
“Tenants must ensure they continue to pay their rent, but if they struggle, they would be wise to seek help from a debt advice charity and keep communicating with their landlord. This is hugely important should tenants lose their job and fall onto state benefits and can no longer afford to live in the property, but it is worth remembering that landlords must give three months’ notice to tenants until the end of September 2020.
“The optimism seen at the start of this year for a prosperous buy-to-let market in 2020 could well have waned in light of the virus, and as margins grow tighter, it’s vital landlords consult a financial adviser and keep in regular contact with their tenants to get through these uncertain times.”
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It will not just be BTL mortgages being with drawn, home owner mortgages will also be withdrawn, mortgages and loans for all will be very much harder to get and deposits will be very much higher, which is no bad thing, too many people living on credit has to change now.
A grab for some market share which makes perfect sense, one lenders prudence is anothers opportunity, and it is quite normal in times of crisis, quite a few lenders did it after 2008. Nationwide have just relaunched resi interest only mortgages as well. They can control their risk with the underwriters, the LTV alone does not expose them, but the plan will generate enough enquiries for them to cherrypick the best ones.
Rely on the lenders - to look after their own interests - and stuff everyone else!
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