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Hundreds of buy-to-let mortgages withdrawn due to coronavirus

Online buy-to-let mortgage broker, Property Master, has warned that landlords will struggle to get mortgages as lenders pull product ranges, tighten lending criteria and widen margins, due to the impact of the coronavirus.

Some lenders have chosen to exit the buy-to-let mortgage market altogether for the foreseeable future.

These include Saffron Building Society, which offered a range of mortgages including for portfolio and limited company landlords, The Melton Mowbray Building Society and Barclays has withdrawn all products for portfolio landlords.

Together Money and Vida Homeloans have suspended lending in both the buy-to-let and residential products.

Tracker buy-to-let mortgages are being taken off the market. In recent days The Mortgage Works and HSBC have both withdrawn their tracker mortgages for the foreseeable future.

Lending criteria are being tightened

In recent times some lenders have been prepared to lend up to 85% of the value of a buy-to-let property. Fewer are prepared to do so now as fears grow of falling property prices.

Kensington Mortgages, for example, is one of those lenders that has reduced maximum loan-to-value lending criteria down from 85% to 75%.

Widening margins

Whilst landlords might expect a lower Bank of England base rate will lead to lower mortgage rates this is not always proving to be the case.Lenders concerned about the increased risk of tenants defaulting on rents and falling property prices may well choose to widen their margins and increase the cost of borrowing.

Some lenders have increased rates despite the 0.65% fall in base rate where margins as a result have increased by about 1%.

Comment

Angus Stewart, Property Master’s chief executive, said: “The competitive and attractive buy-to-let mortgage market appears to be going into reverse as the impact of the coronavirus begins to bite.

“Landlords are finding that their borrowing options are being drastically reduced as lenders respond to this new record low base rate environment and fears of falling house prices by withdrawing entire product ranges.

“We have had clients mid-way through a mortgage application only to find the process is halted and the product withdrawn before they can reach completion and the release of funds.”

“We can well imagine the difficulties lenders are facing when it comes to valuing properties and properly pricing risk. But we would urge them to continue to support landlord customers, especially those who were moving successfully through the mortgage application process and would otherwise have expected to be shortly in receipt of a loan.

“Similarly, we would urge banks to stand by the commitment made by the Government to provide payment holidays to landlord customers struggling as the current crisis impacts on the ability of tenants to pay their rent.”

By Joanne Atkin

Source: Mortgage Finance Gazette

BTL mortgage availability Almost half One in 10 North West Stamp Duty holiday Buy-to-let 5-year fixed BTL mortgages buy to let investment areas UK property investment locations buy-to-let lenders BTL properties buy-to-let landlords Number of UK buy-to-let landlords buy-to-let limited companies
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The cost of 5-year fixed BTL mortgages falls

The cost of 5-year fixed buy-to-let mortgages has resumed a downward trend, Property Master’s January 2020 Mortgage Tracker has found.

The biggest month-on-month fall in cost was for 5-year fixed rate buy-to-let mortgage offers for 50% of the value of a property, falling by £15 from December to January.

Angus Stewart, chief executive at Property Master, said: “We did detect the buy-to-let market, as with many other sectors, was holding its breath until the election was out of the way.

“Now with such a clear, decisive victory we would expect confidence to return and our latest research has shown that this is being seen in a fall in the cost of borrowing.

“Most of this downward pressure on mortgage rates is though from greater competition amongst lenders for good business.

“A lower Bank of England base rate – which may now be on the cards – would give lenders scope to cut more deeply.

“Balancing out the good news of lower borrowing costs though there is for 2020 a list of tax and regulatory changes that will hit landlord profits.

“The traditional tax relief on mortgage interest will finally be phased out in April 2020 whilst those landlords that are renting out their own home will find from this year, they will be subject to full Capital Gains Tax when they come to sell.

“Meanwhile landlords will have to ensure their properties meet Minimum Energy Efficiency Standards to a new level this year and the ban on tenancy fees will be extended to all existing tenancies.

“Any reduction in borrowing costs will therefore be very welcome indeed.”

In regards to 5-year fixed rate offers for 65% of the value of the property, cost fell month-on-month by £11 while 5-year fixed rate offers for 75% of the value saw a monthly decrease of £3.

Meanwhile 2-year fixed rate buy-to-let mortgage offers for 65% and for 75% of the value of a property fell by £3 per month each from December to January.

By Michael Lloyd

Source: Mortgage Introducer

Buy To Let Mortgage Market Brexit deal BTL Tax changes Rental income buy-to-let hotspots Buy To Let Property Sector buy-to-let buy to let property investors Buy-to-let Two bed properties
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FACT Report Shows Buy To Let Mortgage Market Stable

The buy to let mortgage market is stable according to the latest FACT (Financial Adviser Confidence Tracking) report from Paragon.

The FACT report, based on interviews with 201 mortgage intermediaries, revealed a slowdown in overall mortgage business during Q3 2019, but stability in the buy to let market.

The average number of mortgages introduced per office in Q3 2019 was 21.9, down 3 per cent from 22.5 in the second quarter and the lowest figures since Q2 2017. The average number of mortgages introduced per adviser also fell, down from 7.9 to 7.4.

Despite this slowdown, the FACT report showed that the buy to let market has remained relatively stable since a notable decline in 2016 and comprised 17 per cent of mortgages introduced in the quarter, up 2 per cent from 15 per cent in Q2 2019.

Remortgaging was again the principal type of borrowing amongst homeowners, accounting for 46 per cent of mortgages introduced in Q3 and maintaining the disparity that has been widening at modest pace over the last five years. Elsewhere, next time buyers accounted for 18 per cent of new business, down from 19 per cent in the previous quarter, and first-time buyers fell from 18 per cent to 16 per cent.

In terms of buy to let business completed in Q3 2019, first-time landlords grew from 11 per cent to 13 per cent and remortgaging climbed from 52 per cent to 55 per cent. However, the proportion of landlords raising finance for portfolio extension was smaller, down from 23 per cent of business in the second quarter to 20 per cent.

Looking ahead, the FACT report showed intermediaries forecast a 2 per cent pick-up in overall business over the next 12 months and a 1 per cent increase in buy to let.

John Heron, Director of Mortgages at Paragon, said: ‘After a number of years of instability and negative sentiment in the buy to let market, it’s encouraging to see mortgage intermediaries forecasting increased buy to let business over the next 12 months. However, the market overall has been constrained by the current Brexit uncertainty and it remains difficult to see exactly when this will end.’

The FACT Index score, designed to establish advisers’ overall confidence in the mortgage market is 97.8 for Q3, down 11.2 compared with six months ago and the lowest score recorded since Q1 2017.

Source: Residential Landlord

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First Time BTL choice up and rates down

Competition within the first-time landlord buy-to-let mortgage market has increased significantly over the last five years seeing a rise in the number of products available and a reduction in rates, research from Moneyfacts.co.uk reveals.

Over the last five years, the number of products available for first-time landlords has increased from 645 in 2014 to 1,405 today. As well as this, rates for both two-year and five-year fixed mortgages have also fallen, with the average two-year fixed rate decreasing from 4.01% in 2014 to 2.97% today and the average five-year fixed rate falling from 4.68% to 3.52% during the same period.

Buy-to-let market analysis – First-time landlord products

Jul 2014 Jul 2017 Jul 2018 Jul 2019
Average two-year fixed rate 4.01% 2.85% 2.83% 2.97%
Average five-year fixed rate 4.68% 3.63% 3.94% 3.52%
Number of overall products 645 1,034 1,268 1,405

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Fixed rates for first-time landlords start below 1.50% on a two-year fixed deal, but the associated upfront product fees must be considered carefully. Borrowers must ensure they weigh-up the true cost of any deal before they commit; for example, choosing the lowest two-year rate in the market from Barclays Mortgage at 1.46% would cost £20,901 in repayments after the first two years, which includes its £1,795 product fee*. However, if they opted for a deal with a lower fee, such as the mortgage from Post Office Money® priced at 1.48% with a £1,495 product fee, they would have saved £255, as the repayment would be £20,646 over two years.

“First-time landlords concerned about potential rate rises may instead consider a five-year fixed deal, and thankfully rates have fallen in this sector since 2014. In fact, the average five-year fixed rate for first-time landlords has fallen by 1.16% since July 2014, down from 4.68% to 3.52% today.

“As the market is awash with economic uncertainties and regulatory adjustments, consumers would do well to first seek independent financial advice if they are considering a buy-to-let investment, not just to find the best product, but to also review these impacting influences.”

*Based on £200,000 repayment mortgage over a 25-year term.

Source: Property118