Mortgage lenders axe almost HALF of buy-to-let mortgage options

Mortgage lenders axe almost HALF of buy-to-let mortgage options amid ongoing coronavirus lockdown

  • Mortgage lenders have slashed buy-to-let deals in the wake of the coronavirus 
  • More than 1,300 buy-to-let mortgage deals have been axed since March
  • This accounts for nearly half of all available deals, with 1,593 now left
  • Learn more about how to help people impacted by COVID

Landlords are seeing their mortgage options slashed as lenders pull deals from the market in the wake of the coronavirus pandemic. 

The number of buy-to-let deals has almost halved in three weeks, limiting competition among lenders and pushing up rates.

There has been an overall fall of 1,304 buy-to-let products in the market compared to the start of March 2020, according to financial experts at Moneyfacts.

This leaves some 1,593 deals still available. However, for landlords with smaller deposits, options have become far more limited.  

Product choice for borrowers at 80 per cent loan-to-value has plummeted on both two and five-year fixed deals by 122 and 134 products respectively, meaning there are now fewer than 40 deals left in this loan-to-value range.

There are 1,593 buy-to-let mortgages still available, down from 2,897 in March

There are just 19 two-year fixed rate deals at 80 per cent loan-to-value left, after 122 deals were cut, while a cut of 134 five-year 80 per cent loan-to-value deals means there are now just 16 of this type remaining.

There have been a few new deals released for 60 per cent loan-to-value mortgages however, as these are typically seen as lower risk for lenders. These include five new two-year deals and six new five-year deals.

Despite this, average interest rates on fixed buy-to-let mortgages have actually risen for borrowers who have a 40 per cent deposit.

Rates on both two and five-year fixed rate buy-to-let products at 60 per cent loan-to-value rose by 0.35 per cent and 0.31 per cent on average respectively since last month. 

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.’ 

What has happened to the number of buy-to-let mortgage deals? 
Product numbers Mar-20 Today Difference
BTL product count (fixed and variable) 2,897 1593 -1,304
Two-year fixed rate BTL all LTVs 914 507 -407
Two-year fixed rate BTL at 60% LTVs 124 129 5
Two-year fixed rate BTL at 80% LTVs 141 19 -122
Five-year fixed rate BTL all LTVs 1,000 556 -444
Five-year fixed rate BTL at 60% LTVs 133 139 6
Five-year fixed rate BTL at 80% LTVs 150 16 -134
Source: Moneyfacts (Figures accurate to 14 April 2020)

She added: ‘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.’

It’s not all bad news however. Overall two-year fixed rate deals have got slightly cheaper on average, from from 2.77 per cent in March to 2.58 per cent today, while five-year deals have also dropped on average by 0.26 per cent over the same time period.  

What has happened to buy-to-let mortgage rates? 
Average rates Mar-20 Today Difference
Two-year fixed rate BTL all LTVs 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 LTVs 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 (Figures accurate to 14 April 2020)      

‘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,’ Springall added.

Specialist buy-to-let broker Mortgagesfor Business says only ‘a handful’ of landlords contacting its switchboard about mortgage repayment holidays are raising legitimate concerns about how to pay their mortgage in the face of the pandemic.

The broker urged landlords only to request a payment holiday if they actually need one, adding that doing so without a valid reason may harm a landlords’ ability to gain access to loans in the future.       

Landlord hit by triple hit as new tax year begins

Landlords suffered a triple-whammy hit this month as three popular tax reliefs were axed or scaled back as the new tax year began. 

Mortgage interest tax relief, capital gains tax exemptions for ‘accidental’ landlords – those who held onto homes they once lived in – and letting relief were all cut.

The raid came as the Government fully implemented promises dating back some years, aimed at making it easier for first-time buyers to compete for properties.

You can read how the tax changes will affect landlords in more detail by clicking here.